Answer (B) is correct . Discretionary costs are characterized by uncertainty about the relationship between input (the costs) and the value of the related output. Advertising and research are examples. They should be contrasted with engineered costs, that is, costs having a clear input-output relationship (e.g., the cost of direct materials).
Answer (A) is incorrect because Committed costs are 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 (C) is incorrect because Opportunity cost is the return available from the next best use of a resource.
Answer (D) is incorrect because Differential (incremental) costs are those that vary among decision options.
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