Decisions to Install New Equipment, Replace Old Equipment, and Purchase

question 49

Multiple Choice

Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of

• A) capital investment decisions.
• B) incremental analysis.
• C) sales mix analysis.
• D) direct costing decisions.

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Definitions:

Direct Cost

Expenses that can be directly traced to a product, service, or department, such as raw materials or labor.

Cost Object

Any item for which cost is measured and assigned, including products, services, projects, departments, or activities.

Selling Expenses

Costs incurred directly and indirectly in selling a product, including advertising, sales staff salaries, and commissions.

Administrative Expenses

Costs related to the general operation of a business that are not directly tied to producing goods or services.