Cameron Industries Is Purchasing a New Chemical Vapor Depositor in Order

question 77

Multiple Choice

Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6 million to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to have a working life of six years. Which of these activities will be reported as an operating expense?

• A)the delivery and install cost only
• B)the cost of the depositor only
• C)the redesign of the plant only
• D)the delivery and install cost and the cost of the depositor

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Definitions:

Bowed Outward

Refers to the shape of a production possibility frontier that shows increasing opportunity costs as production shifts between two goods.

Absolute Advantage

A situation in which a nation, as the result of its previous experience and/or natural endowments, can produce more of a good (with the same amount of resources) than another nation can.

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than its trading partners, leading to specialized production and trade benefits.

Bagels

A dense, chewy, doughnut-shaped bread product, often enjoyed as a breakfast item and can be topped with various ingredients.