Discretionary costs reflect:
A) The costs that managers incur to purchase new production machines when the old machines need replacing.
B) Decisions about the maximum amount that will be spent next period for activities such as travel and marketing.
C) Decisions about the amount of variable costs that will be incurred next period.
D) The costs that managers incur to pay overtime when production levels are high.

Question

Quizplus · Accepted Answer

Discretionary costs are costs that are not predetermined or required, but are rather optional and up to the discretion of management. These costs relate to expenses such as advertising or research and development, where the amount spent is determined by management's judgment rather than a set formula. Option B correctly states that discretionary costs relate to decisions about the maximum amount that will be spent on activities such as travel and marketing.

Discretionary Costs Reflect