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Differentiate Between Committed Costs and Discretionary Costs

question 75

Essay

Differentiate between committed costs and discretionary costs. Be sure to present two examples of each and explain which of the two cost types would likely be cut should a company encounter financial difficulties.


Definitions:

Semi-annually Return

The return on an investment calculated twice a year, showing the investment's performance over each six-month period.

Investment

The allocation of resources, such as capital, time, or effort, in hope of generating a gain or profit in the future.

Fat Tails

Refers to the occurrences of extreme movements in stock prices or higher than normal risks in investments, which lead to heavy tails in a probability distribution.

Kurtosis

Measure of the fatness of the tails of a probability distribution. Indicates probability of observing extreme high or low values.

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