Chapter 4, Problem 1DQ

Define committed costs and provide two examples of committed costs?

To determine

Describe committed costs along with a couple of examples.

Explanation of Solution

Committed Costs: The committed costs refer to the cost a company commits to pay in the future. It may be a pre-determined amount agreed upon by both parties.

Examples of committed costs are:

• Fix-price subcontracts
• Purchase orders having a pre-determined price.