Alex Leases Property from Sandra for Business

question 11

Multiple Choice

Alex leases property from Sandra for business. Alex opens a hardware repair shop in this property. He affixes welding equipment to the property. After a period of time, Alex decides to move his business to a different location. Which of the following statements is true of this scenario?

• A) Alex may not move the welding equipment, as it is now Sandra's property.
• B) Alex may move the welding equipment only if a written agreement states that the parties will treat the welding equipment as his personal property.
• C) Alex may not move the welding equipment, as it is essential to the functioning of the structure.
• D) Alex may move the welding equipment, as the welding equipment is a trade fixture.

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Definitions:

Overhead Cost

Expenses related to the operation of a business that cannot be directly tied to a specific product or service, such as rent, utilities, and administrative salaries.

Activity-Based Costing

A costing method that assigns costs to products and services based on the activities and resources that go into producing them, aiming for more accurate product costing.

Activity Rate

A rate that is used to apply costs in activity-based costing, linking the cost of business activities to the products or services that require these activities.

Batch Setup

The process and associated costs of preparing equipment and facilities for a specific batch of production, often involving setup time and expenses.