Did you just write a short lesson to explain the difference between capex and opex? Well... thank you, I guess.
But again, the question is: is it ever rational for a functional unit manager to be given a particular maximum opex budget and not be allowed to capitalize a part of that? What benefit would such a restriction offer to the business?
> What benefit would such a restriction offer to the business?
You approve opex budget for the widget department because you know they can turn 10 cents of plastic into $1 of widgets, and you want them doing that in the forthcoming quarter. You're happy for them to spend a nigh-unlimited amount on inputs like plastic, so long as it's on things with a 90% margin.
But you don't want the department head spending their nigh-unlimited budget on things that don't get sold on with a 90% margin. So you don't let them charge the O'Reilly books to the nigh-unlimited part of their budget.
Thanks, I see how this would make sense in general. But it does go against this particular case, no? L&D should probably be budgeted outside the widget COGS anyway, but assuming that the widget department has a single budget, and they're going to be using it for O'Reilly books anyway, is it still somehow rational to pay more for a subscription than less for owning the books? Is it just that that consider the extra accounting effort to be more expensive than dealing with the relatively small inefficiencies?
But again, the question is: is it ever rational for a functional unit manager to be given a particular maximum opex budget and not be allowed to capitalize a part of that? What benefit would such a restriction offer to the business?