Committed Fixed Costs Include: 1. Advertising 2. Research & Development 3. Depreciation on Buildings & Equipment...

Committed Fixed Costs Include:

1. Advertising

2. Research & Development

3. Depreciation on Buildings & Equipment

4. Contributions to Charitable Organizations

5. Expenditures for Direct Labor

Expert Solution

Committed fixed cost :

1) A fixed cost which has already been committed by the management is called committed fixed cost. And which include investment in equipment and building etc.

2) Investment that entity has already made and it is not relevant for decision making purpose.

3) They are generally long term in nature and it is a irrelevant cost.

SI NO	PARTICULARS	WHETHER COMMITTED FIXED COST	REASON
1	Advertising	No	Fixed cost are those cost which does not change with turnover of the entity. Advertising expenditure will change with change in voulme of business. So it cannot be treated as a fixed cost. Other view is also possible, Advertising can be treated as fixed cost also. In that case answer will change
2	Research and development	No	More and more Research and development expenditure will be incurred on change in taste, preference of the customers etc.So it is not considerd to be fixed cost.
3	Depreciation on buildings and equipment	Yes	Committed fixed costs are organisational investment that cannot vary over a period. depreciation will be a treated as committed fixed cost.
4	Contribution to charitable organisations	No	Generally these kind of contribution will incur occassionaly and it is not related to any investments etc.
5	Expenditure for direct labor	No	It is yet to be incurred on the basis of days worked by workers. labor cost will be incuring on a daily basis on the basis of production. So it is not a commiited fixed cost.

ekkarill92 answered 1 year ago

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