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Discretionary fixed cost

A discretionary fixed cost is set by a management policy or spending decision for the period rather than varying automatically with current output. Advertising, training or research programmes can have this characteristic. It may be adjustable, but cutting it can damage future performance or breach existing commitments. Distinguish the short-term spending choice from whether the activity creates value and from a committed fixed cost tied to installed capacity.

Worked example

Management sets an annual training budget of $40,000. Reducing it might save cash if uncommitted, but could weaken skills and future quality.

Common mistake

Discretionary does not mean unnecessary or safely removable without consequences.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
ACCA PM Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027