Feedstock or raw material costs

The cost of new plant and equipment

The cost of the organization’s insurance policies

Employee salary costs

Energy costs

The logistics of delivering the gas compressor to site

What customs and import duties may be applicable to the compressor.

All of the above

When ownership of the compressor changes and hence when it needs to be insured.

The payment terms of the contract

For products that have limited lifespan, high inventory levels are cost effective as it ensures reliability of supply.

The material within the production plant is not counted as inventory because it is not finished.

Increasing inventory does not affect working capital.

The logistics of feedstock delivery (e.g., tanker ship or pipeline) affects the amount of feedstock inventory that must be kept to ensure reliable production.

For most organizations it I not important to manage inventory levels.

Accountants usually draft the capital budget because they know how much money the organization has available.

Engineers rarely get involved in capital budgeting issues.

Engineers are usually intimately involved in drafting the capital budget because they design and cost new capital projects.

Capital budgets are not important as most organizations can borrow more money than they need.

If the capital budget is tight, it is normal to buy items out of spare operating budget cash.

90% debt and 10% equity because engineering firms are not worthy.

70% debt and 30% equity because engineering services are always needed.

75% debt and 25% equity because interest on borrowed funds is taxable.

50% debt and 50% equity because engineering firms have high margins.

10% debt and 90% equity due to the need to ensure repayment of debt obligations.

$348,685

$400,000

$316,987

$100,000

$250,000