Hometown Delivery Co. incurred the following costs related to trucks and vans used in operating...

Question:

Hometown Delivery Co. incurred the following costs related to trucks and vans used in operating its delivery service:

1. Changed the oil and greased the joints of all the trucks and vans.

2. Changed the radiator fluid on a truck that had been in service for the past four years.

3. Installed a hydraulic lift to a van.

4. Installed security systems on four of the newer trucks.

5. Overhauled the engine on one of the trucks purchased three years ago.

6. Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no longer under warranty.

7. Removed a two-way radio from one of the trucks and installed a new radio with a greater range of communication.

8. Repaired a hat tire on one of the vans.

9. Replaced a truck s suspension system with a new suspension system that allows for the delivery of heavier loads.

10. Tinted the back and side windows or one of the vans to discourage theft of contents.

Classify each of the costs as a capital expenditure or a revenue expenditure.

Cost classification

Here we distinguish between an expense and a capital expenditure

Answer and Explanation: 1

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1. Changed the oil and greased the joints of all the trucks and vans. Revenue expenditure

2. Changed the radiator fluid on a truck that had been in...

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Comparing Cost Classifications

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Chapter 2 / Lesson 1
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Costs are categorized based on their function within a business. Examine in detail the common costs accounted for in business decisions: fixed, variable, mixed, direct, indirect, production, period, opportunity, and sunk costs.


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