Final answer:
Capital investments, such as machinery or factory rentals, represent non-discretionary, fixed costs that do not vary with production levels. Operational investments can be considered discretionary, variable costs that managers can adjust based on production decisions.
Step-by-step explanation:
Within the context of business costs, investments can be categorized based on their cost behavior, which can either be fixed or variable. Fixed costs relate to the use of fixed inputs such as capital, where expenditures remain constant regardless of production levels. For example, leasing a factory incurs a fixed rental cost that does not fluctuate with the amount of production.
This contrasts with variable costs, which vary with production levels. Hence, investments in fixed assets like machinery, research, and development or advertising to build brand awareness are usually considered non-discretionary costs, as they are essential for business operations and do not change in the short run. On the other hand, some costs can be adjusted based on managerial decisions and are thus discretionary costs.