Final answer:
The expenses related to acquiring and maintaining machinery are divided into capital expenditures and operating expenses. Capital expenditures include purchase price, sales tax, transportation, insurance, installation, and major overhauls, while operating expenses cover ordinary repairs, routine lubrication, and initial training. In a changing economy, focus may shift to durable goods, lifetime warranties, and service contracts.
Step-by-step explanation:
The question primarily involves understanding the capitalization and expenses associated with acquiring and maintaining machinery in a business context. Expenses such as the purchase price, sales tax, transportation, insurance during transit, and installation costs are capitalized as part of the machinery's cost basis and thus are part of the investment in the machinery. On the other hand, costs like ordinary recurring repairs, lubrication after the machinery is placed in service, and training of personnel for initial operation are more likely to be considered operating expenses and are expensed as incurred.
A major overhaul to extend useful life of the machinery, typically, is capitalized, adding to the asset's value and depreciated over the extended life of the machinery. Moving beyond specific costs, if we consider changing economic conditions where repair becomes cheaper and the disposable economy fades, businesses may adopt a longer-term view with a focus on durable goods, lifetime warranties, and designs that facilitate upgrades. Higher quality goods and craftsmanship may become more valued, and service contracts and warranties may become more prevalent as sellers promise to fix or replace goods within a certain time frame.