Cost Types Flashcards
Run the Business (RTB),
Grow the Business (GTB),
Transform the Business (TTB) Costs
Also known as RTB/ GTB/ TTB costs. These are categories of Services Investments as defined in ITIL v3:
- RTB: investments centered on maintaining service operations
- GTB: investments intended to grow the organization’s scope of services
- TTB: investments are moves into new market spaces
Discretionary Spend
Money spent by a company on things such as advertising or development of new products, that can be reduced temporarily without affecting business: For IT, discretionary spending commonly consists of new application development and significant enhancements to existing apps.
Non-Discretionary Spend
Spending that is required by a budget, contract, law or other commitment. Includes all run costs (a.k.a. keep the lights on costs). Some costs associated with growing the business may be considered non-discretionary as well.
Fixed Cost
Business expense that is not dependent on the level of goods or services produced by the business. Examples include: most data center costs, application development, rent, employee salaries.
Variable Cost
Business expense that changes in proportion to the level of goods or services produced by the business. Examples include network and laptop costs, public cloud hosting.
Direct Cost
Cost that can be completely attributed to the production of a specific good or service. Examples include cost of labor to enhance an application, cost of a server associated to running Oracle GL.
Indirect Cost
Cost not directly associated with a cost object (such as a particular project, facility, function or product). Indirect costs may be either fixed or variable. Indirect costs include administration, personnel and security costs.
Unit Cost
Cost incurred by a company to produce, store and sell one unit of a particular product or service (e.g. one call to the service desk or one minute of one call to the service desk). Unit costs include all fixed costs and all variable costs involved in production.
Total Cost of Ownership
Total cost of ownership (TCO) is the purchase price of an asset plus the costs of operation (e.g. maintenance, support). When choosing among alternatives in a purchasing decision, buyers should look not just at an item’s short-term price, which is its purchase price, but also at its long-term price, which is its total cost of ownership.
Overhead Cost
Cost not directly related to the production and sale of a product or service that creates revenue for the business. Examples include: rent, insurance, furniture.
