Research and Development Costs Should Be Capitalized When The

question 120

Multiple Choice

Research and development costs should be capitalized when the:

• A) Future benefit is probable and the amount can be reasonably estimated.
• B) Future benefit is reasonably possible and the amount can be reasonably estimated.
• C) Future benefit is probable and the amount cannot be reasonably estimated.
• D) None of the above are correct as research and development costs are never capitalized under U.S. accounting rules.

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Definitions:

Marginal Product

The additional output that is produced by using one more unit of a variable input.

Average Product

This measures the productivity of inputs by dividing total production by the number of inputs, indicating the efficiency of input use.

Total Product

The total quantity of output produced by a firm or economy as a result of combining inputs of labor and capital over a specific time period.

Average Product

The output produced per unit of input used, calculated by dividing total output by the quantity of inputs.