Cost Behavior and Cost Estimation MCQs

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on March 25, 2022

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Frequently Asked Questions

What is a Committed Cost?

A Committed Cost is an expense that has already been incurred and will not change regardless of the company’s production volume in the short term.

What are some examples of Committed Costs?

Committed Costs are important because they represent expenses that have already been incurred and cannot be avoided. In addition, they provide a baseline against which to measure changes in future production volume and costs.

What are some examples of Committed Costs?

What are some examples of Committed Costs?

How can you use cost behavior information to make better business decisions?

Managers can make more informed decisions about pricing, production levels, and other strategic decisions by understanding how costs behave. For example, if the company is experiencing rising variable expenses, the manager may raise prices to protect profits. Alternatively, if the company is experiencing rising fixed costs, the manager may reduce production to reduce costs.

How can a company reduce its Committed Costs?

A company can reduce its Committed Costs by renegotiating leases, finding cheaper insurance, and cutting employee wages. However, these cost-cutting measures may have negative implications for the business in the long run.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

2 thoughts on "Cost Behavior and Cost Estimation MCQs"

    1. Thanks! Let us know what other kinds of information you’d like to see and we’ll try to add it in the future. Best of luck!

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