A capital item (a necessary element in setting price) is best described as
A. a building or other type of major equipment
B. office supplies purchased by the individuals
C. raw materials that become part of the physical good
D. long-lasting products that can be depreciated
E. Both (A) and (D)
Answer: (E) Customers pay for the capital items when they buy it, but for tax purposes the cost is spread over a number of years. Therefore, a long-lasting product that can be depreciated (D) is a capital item. An example of a capital item is an installation, buildings, land rights, or major equipment in any business or company (A); thus, (E) is the correct answer. Office supplies purchased by individuals are not long lasting, nor would a person depreciate office supplies over a number of years; therefore, (B) is not correct. Raw materials (C) are not considered capital items, but instead are expense items.