Final answer:
Discretionary costs, such as marketing and advertising, are flexible and can be adjusted in the short term without affecting a factory's operations. Committed costs like lease payments and equipment depreciation are unavoidable long-term expenses that a shoe factory must pay to maintain operations.
Step-by-step explanation:
Discretionary Costs
Discretionary costs refer to expenses that can be altered or deferred in the short term based on business decisions without immediate impact on the firm's core operations. A shoe factory's example of a discretionary cost could be marketing and advertising expenses. The justification lies in the ability to increase or decrease these costs programmatically, according to market conditions or financial health. Marketing campaigns might be ramped up to boost sales during peak seasons or trimmed down when budget constraints necessitate cost-saving measures.
Committed Costs
Committed costs, on the other hand, are long-term, unavoidable costs essential to the ongoing operations of a firm. Two examples for a shoe factory include the lease payments for factory space and the depreciation on essential manufacturing equipment. These costs must be paid regardless of the company's financial situation, as they're often bound by contractual obligations or are intrinsic to the maintenance of the business's core capabilities.