Advertising Cost Is an Example of a Discretionary Cost

question 12

True/False

Advertising cost is an example of a discretionary cost.

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overheads, taxes, and interest payments.

Operating Expenses

Costs related to the day-to-day functions of a business outside of direct production costs, such as rent, salaries, and utilities.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and considered variable costs.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor used in creating the product.