Ryan Company Purchased a Building on January 1, 2018, for $250,000

question 154

Multiple Choice

Ryan Company purchased a building on January 1, 2018, for $250,000. In addition, during 2018 the following costs related to the building have been incurred: The amount of expenditures to capitalize for the year (not including the initial purchase of the building) is:

• A) $35,000.
• B) $85,000.
• C) $81,000.
• D) $72,000.

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Definitions:

Avoidable Cost

An expense that can be eliminated if a particular decision is made, not incurred if a specific activity is discontinued.

Fixed Production Cost

The portion of total production costs that does not change with the level of output, including costs such as rent, salaries, and insurance.

Vertical Integration

The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service.

Economies of Scale

The cost advantage that arises with increased output of a product, as the fixed costs are spread over more units of production.