An Insurance Office Owns a Large Building Downtown

question 85

Multiple Choice

An insurance office owns a large building downtown. The sixth floor of this building currently houses its entire Human Resources Department. After carrying out a survey to see whether the sixth floor could be rented and for what price, the company must decide whether to split the Human Resources Department between currently unoccupied spaces on several floors and rent out the entire sixth floor or to leave things as they currently are. Which of the following should NOT be considered when deciding whether to rent out the sixth floor?

• A) the amount obtained by renting the sixth floor
• B) the cost of refurbishing the new space to be occupied by the Human Resources Department
• C) cost involved with a loss of efficiency resulting from the Human Resources Department being split between several spaces
• D) the cost of the research into the feasibility of renting the sixth floor

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Definitions:

Incremental Sales

Additional sales generated by a new business activity, such as a marketing campaign or product launch, beyond what would have been sold without it.

Operating Expenses

Costs associated with running a business that are not directly linked to the production of goods or services, including rent, utilities, and administrative salaries.

Capital Budgeting

Involves analyzing potential investments and expenditures to determine their economic viability and how they align with the company’s strategic goals.

Straight-Line Depreciation

An approach to spreading out the expense of a tangible resource evenly over its operational lifespan in annual increments.