Costs Included in Assets
Below Is a List of Various

question 25

Essay

Costs included in assets
Below is a list of various expenditures that an organization could make. In the columns marked Land, Building, Equipment, and Expensed, indicate by a “+” or “–“ which columns the expenditure would be added to or subtracted from. The first has been done for you as an example.

$$\begin{array} { | l | l | l | l | l | } \hline \text { Item } & \text { Land } & \text { Building } & \text { Equipment } & \text { Expensed } \\\hline \text { 0. Construction costs } & & + & & \\\hline \text { 1. Title search } & & & & \\\hline \text { 2. Property transfer tax } & & & & \\\hline \text { 3. Installation of equipment } & & & & \\\hline \text { 4. Soil decontamination costs } & & & & \\\hline \text { 5. Transportation costs of equipment } & & & & \\\hline \text { 6. Labour to construct building } & & & & \\\hline \text { 7. Special foundation for machinery } & & & & \\\hline \text { 8. Damage to machinery while uncrating } & & & & \\\hline \begin{array} { l } \text { 9. Proceeds from salvage of old building on } \\\text { land purchased for factory site }\end{array} & & & & \\\hline \begin{array} { l } \text { 10. Property taxes in arrears paid on } \\\text { purchase }\end{array} & & & & \\\hline \text { 11. Insurance on building after occupancy } & & & & \\\hline \text { 12. Clearing land for factory site } & & & & \\\hline\end{array}$$

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Definitions:

Contribution Margin

The differential between sales and variable costs, indicative of a product's profitability before fixed costs are subtracted.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production expenses, in contrast to fixed costs.

Fixed Manufacturing Cost

Expenses that do not change with the level of production, such as rent for factory premises, salaries for permanent staff, and depreciation of equipment.

Manufacturing Overhead Cost

Expenses related to the production process that are not directly tied to a specific product, including utilities, depreciation, and salaries for production supervisors.