CapEx vs OpEx: If an organization purchases an asset that benefits future periods, the expense is capitalized; otherwise it is operational expense.

• A. Cost of capital / WACC
• B. COGS
• C. Fully loaded costs
• D. CapEx vs OpEx

Answer: (D)

The key idea is deciding when spending should be treated as a long-term asset versus a current-period expense. CapEx vs OpEx is exactly the term for that choice. If an asset provides benefits over multiple future periods, you capitalize it—recording it on the balance sheet as an asset and allocating the cost over its useful life through depreciation or amortization. If the benefits don’t extend beyond the current period (or the amount is immaterial), you expense it now, reducing net income in that period. That’s why this option best fits the description. The other terms refer to financing costs (cost of capital/WACC), production costs (COGS), or broad total cost concepts (fully loaded costs) and don’t capture the capitalization vs expensing distinction.