Discretionary Cost

1. Discretionary costs are costs that might or might not be incurred. They normally are fixed costs, have no causal relationship to the outputs of the costs, and are typically incurred because of an annual (or other periodic) decision regarding the amount of the cost to be incurred. Examples of discretionary costs include human resource costs, advertising, training of executives, and other costs that are not generally crucial to the production process or other significant activity of the organization. Discretionary costs can be contrasted to committed costs. See also committed costs. A cost whose amount within a time period is governed by a management decision to incur the cost. (Also called managed cost or programmed cost.)