The following are different categories of costs: Variable, Fixed (committed), Fixed (discretionary), and Mixed. Identify what type of cost is best represented by the following examples of costs and briefly explain why. The answer to the first one, Rent, is provided as an example: Rent is a fixed, committed cost because it does not change due to differences in activity levels. In other words, rent is always a cost that will be due regardless of business activity level. It is generally considered a committed cost because once you sign the lease you are committed to pay rent for the life of the lease.

• Rent: Answer explained above
• Property taxes on land and building
• Billboard advertising campaign
• Raw materials used in the manufacturing process
• Employee picnic with band, food, and door prizes