Question: What Are Discretionary Costs?

What are discretionary items?

Discretionary income is the amount of an individual’s income that is left for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing.

Discretionary income includes money spent on luxury items, vacations, and nonessential goods and services..

Is rent a variable cost?

Variable & Fixed Cost Fixed costs often include rent, buildings, machinery, etc. Variable costs are costs that vary with output. Generally variable costs increase at a constant rate relative to labor and capital. Variable costs may include wages, utilities, materials used in production, etc.

Is rent a discretionary expense?

While non-discretionary expenses are considered mandatory—housing, taxes, debt, groceries—discretionary expenses are any costs incurred above and beyond what is deemed necessary. These are generally considered wants, while non-discretionary expenses are usually referred to as needs.

Is salary a committed fixed cost?

Examples of committed fixed costs include investments in assets such as buildings and equipment, real estate taxes, insurance expense and some top-level manager salaries. … These fixed costs can be cut out with no real damage to the long-term goals of the company.

What is committed and discretionary fixed costs?

Discretionary vs Committed Fixed Costs Discretionary fixed costs are referred to as period specific costs that can be eliminated or reduced without having a direct impact on profitability. Committed fixed costs are costs that a business has already made or obliged to make in the future; thus, cannot be recovered.

What is a non discretionary cost?

Nondiscretionary expenses are things you must pay for or buy, including the following: Food. Rent or mortgage. Car payments. Utilities.

What is another word for discretionary income?

What is another word for discretionary spending?disposable incomediscretionary incomedisposable personal incomediscretionary expenses

What is a good discretionary income?

While there are many factors that may affect the percentage of take-home pay that you allocate as discretionary income, the general rule is 30 percent or less.

What are two types of expenses?

Different Types of Expenses There are two main categories of business expenses in accounting: Operating expenses: Expenses related to the company’s main activities, such as the cost of goods sold, administrative fees, and rent. Non-operating expenses: Expenses not directly related to the business’ core operations.

Is eating out a discretionary expense?

While rent, mortgage payments, and groceries are necessary, discretionary expenses are those you incur voluntarily such as dining out or cable television. Your discretionary spending budget is only as big as the income you have available to fund it.

What is an example of variable cost?

Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs.

What is the difference between a discretionary and non discretionary bonus?

What is the difference between a discretionary and a nondiscretionary bonus? For a bonus to be considered discretionary, it should be awarded at the sole discretion of the employer rather than expected to be received by the employees. … A nondiscretionary bonus is the opposite of a discretionary one.

What are non discretionary items?

Non-Discretionary Items means all real estate taxes, insurance premiums and utilities relating to the Property.

Is rent a fixed cost?

Unlike variable costs, a company’s fixed costs do not vary with the volume of production. Fixed costs remain the same regardless of whether goods or services are produced or not. … The most common examples of fixed costs include lease and rent payments, utilities, insurance, certain salaries, and interest payments.

What are discretionary fixed costs?

A discretionary fixed cost is an expenditure for a period-specific cost or a fixed asset, which can be eliminated or reduced without having an immediate impact on the reported profitability of a business. … The following can be considered discretionary fixed costs: Advertising campaigns. Employee training.

What are examples of fixed cost?

Examples of fixed costs include rental lease payments, salaries, insurance, property taxes, interest expenses, depreciation, and potentially some utilities.

Is Depreciation a discretionary fixed cost?

While fixed costs such as rent, lease and loan payments, management salaries and depreciation are non-discretionary, other fixed costs, such as advertising, promotional expenses and subscriptions are among those you can choose to include — or not include — in ongoing business spending.

What is an example of discretionary income?

Discretionary income is what a household or individual has to invest, save, or spend after taxes and necessities are paid. Examples of necessities include the cost of housing, food, clothing, utilities, and transportation.