Business

What is Discretionary Cost?

The term discretionary expense means non-essential expense incurred during the period for the operation of a house or business. These are the cost of options that normally occur during the month. These spending is based on wants, not needs. For example, the costs incurred for eating out, purchasing luxury upholstery, traveling, etc. are non-essential or optional. Unlike the essential needs, these costs vary greatly during the month, depending on the type of purchase.

Here are some examples related to the basic costs that must be incurred during the month. For example, you have to pay rent, salaries for employees in the case of businessmen, insurance premiums, utilities, and so on. These payments are obligatory to be made monthly and may need to be paid together, so such payments cannot be eliminated The following month a fine or additional fine will be imposed.

Need to understand discretionary costs

In general, if you experience unemployment or wage cuts during difficult times and need to cover your daily expenses by reducing certain expenses, you should first identify any expenses. Therefore, by tracking discretionary costs, you can see how you can save money in an economic emergency.

For organizations, these costs are usually associated with improving a company’s financial position.

It is also important to note that discretionary costs vary by business and individual. For example, buying a new car may be seen as a desire for one person, while it is seen as an essential need for those who have to commute to the office or place every day and have no other choice. maybe.

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What is Discretionary Cost?

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