Answer (B) is correct . Discretionary costs refer to fixed costs that are not absolutely necessary to operate in the current period. The level of these costs is subject to a decision made by management each period. A key characteristic of discretionary costs is that there is no clearly measurable relationship between input (the costs) and output.
Answer (A) is incorrect because Conversion costs are incurred for labor and overhead.
Answer (C) is incorrect because Committed costs are those fixed costs arising from the possession of plant and equipment and a basic organization. These costs are affected primarily by long-run decisions as to a company’s desired capacity.
Answer (D) is incorrect because An opportunity cost represents the maximum revenue that could have been earned on the next best alternative use of a resource.
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The advertising expense estimated by Gleason for the introduction of the new products is an example of a(n)
