COMMITTED COST Meaning and
Definition
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Committed cost, also known as committed expenditure or committed expense, refers to those costs that an organization is obligated to pay for in the future as a result of past decisions or contractual agreements. These costs are typically fixed in nature and are not easily adjustable in the short term.
Committed costs often arise from long-term contracts, leases, or other legal obligations that bind the organization to make payments over an extended period. Examples include rent payments for a leased facility, loan repayments, insurance premiums, or long-term service contracts. These costs are considered committed because the organization has made a long-term commitment or agreement to pay them.
Unlike variable costs that fluctuate with the level of activity or production, committed costs do not change significantly regardless of the volume of output. Even if production levels decrease or business conditions change, the organization is still obligated to pay these costs.
Committed costs are essential for budgeting and financial planning as they represent fixed obligations that must be considered when assessing an organization's financial health and viability. Managers and financial professionals need to carefully evaluate and forecast committed costs to ensure that sufficient cash flow and resources are available to meet these obligations.
Understanding committed costs is crucial for businesses to make informed decisions regarding their long-term financial commitments and to effectively manage cash flow and financial risks.
Common Misspellings for COMMITTED COST
- xommitted cost
- vommitted cost
- fommitted cost
- dommitted cost
- cimmitted cost
- ckmmitted cost
- clmmitted cost
- cpmmitted cost
- c0mmitted cost
- c9mmitted cost
- conmitted cost
- cokmitted cost
- cojmitted cost
- comnitted cost
- comkitted cost
- comjitted cost
- commutted cost
- commjtted cost
- commktted cost
- commotted cost
Etymology of COMMITTED COST
The term "committed cost" combines the words "committed" and "cost", each with its own etymology.
1. Committed: The word "committed" derives from the Latin word "committere", which consists of "com-" (meaning "together" or "with") and "mittere" (meaning "to send"). The original meaning of "committed" referred to the act of sending or entrusting someone or something to a particular place or person. Over time, its meaning evolved to include being dedicated, devoted, or engaged to a cause or course of action.
2. Cost: The word "cost" has its roots in the Latin word "costus", which meant "expense" or "outlay". It later transformed into "costa" in Old French with a similar meaning before eventually adopting the modern English form "cost".
