Committed cost
A committed cost is a fixed cost arising from long-term capacity decisions — such as depreciation on owned plant or a multi-year lease — that cannot be altered in the short run and is therefore generally irrelevant to short-term decisions.
FrameworkCost behaviour
What it is
See it move
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A manufacturer pays €200,000 a year on a factory lease with three years remaining — a committed cost that continues whether or not a new contract is accepted, so it is excluded from the decision. A discretionary cost, such as a marketing budget, can be raised or cut in the near term without structural consequence, which is why management can adjust it when evaluating the same contract.