Acme Enterprises Just Bought a New Manufacturing Machine

question 206

Multiple Choice

Acme Enterprises just bought a new manufacturing machine.Which of these costs should not be capitalized?

• A) The $500,000 invoice price of the machine
• B) The $15,000 freight bill to deliver the machine to Acme's factory
• C) The $8,000 cost of tearing down Acme's factory wall to get the machine inside
• D) The $100 increase in monthly utility bills to operate the machine

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Definitions:

Marginal Revenue

The extra revenue obtained by selling an additional unit of a product or service.

Marginal Cost

The cost increase from producing a further unit of a product or service.

Long-Run Equilibrium

Long-run equilibrium occurs in a market when all firms earn normal profits, and no new firms have an incentive to enter or exit, resulting in market stability over time.

Average Total Cost

The cost of producing each unit, calculated by dividing the overall production expenses by the quantity of units manufactured.