Cameron Industries is purchasing a new chemical vapour 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'?

Question

Quizplus · Accepted Answer

The cost of building a clean room is considered an operating expense as it is necessary for the machine to operate and maintain its functionality over the next six years. The cost of the depositor and delivery and install costs are considered capital expenditures, as they are part of the initial investment in the machine and its installation.

Cameron Industries Is Purchasing a New Chemical Vapour Depositor in Order