Which of the following is typically included in capital budgeting decisions?

• A. Determining the amount of cash to keep in petty cash
• B. Choosing a supplier for office supplies
• C. Deciding whether to purchase new equipment for a manufacturing plant
• D. Selecting the method for recording inventory

Answer: (C)

Verified step by step guidance

1. Understand the concept of capital budgeting: Capital budgeting involves evaluating and deciding on long-term investment projects, such as purchasing equipment, constructing buildings, or launching new products. It focuses on investments that will generate returns over several years.
2. Analyze the options provided in the problem: Review each option to determine whether it aligns with the definition of capital budgeting. For example, petty cash management and supplier selection are operational decisions, not long-term investment decisions.
3. Identify the correct option: Deciding whether to purchase new equipment for a manufacturing plant is a capital budgeting decision because it involves evaluating a significant investment that impacts the company's long-term operations and financial performance.
4. Exclude irrelevant options: Selecting the method for recording inventory and choosing a supplier for office supplies are accounting and operational decisions, respectively, and do not fall under capital budgeting.
5. Conclude the reasoning: Capital budgeting decisions are strategic and focus on long-term investments, such as purchasing new equipment, which is the correct answer in this case.