Question

Which of the following are considered as costs associated with opening a new facility?

1) Introduction of new product or service
2) Conducting business in new location
3) Administration and other general overhead costs
4) Not brought yet into use or operated at less than fully capacity
5) Initial operating losses
6) Cost of relocation or reorganization

Answer 1

Costs associated with opening a new facility include 2) Conducting business in a new location and 6) Cost of relocation or reorganization.

Step-by-step explanation:

Opening a new facility involves various costs, and two significant ones are conducting business in a new location and the cost of relocation or reorganization. Conducting business in a new location encompasses expenses related to establishing operations in a different geographic area, such as securing premises, complying with local regulations, and adapting to the local business environment.

The cost of relocation or reorganization refers to the financial outlay associated with moving existing operations to a new facility or restructuring the current setup. This includes expenses for moving equipment, technology, and personnel, as well as costs related to the reconfiguration of processes and systems.

These costs are critical considerations in the decision-making process when contemplating the opening of a new facility. They directly impact the financial viability and success of the expansion strategy. By acknowledging and planning for these costs, businesses can make informed decisions and develop effective strategies for a smooth transition and sustainable operation in the new facility.

So, the correct option is 2) Conducting business in a new location and 6) Cost of relocation or reorganization.