Which one is an example of setup cost?Group of answer choicesBusiness insuranceTaxesRaw materials costCleaning previous materialsMachine depreciation

Break Down the Problem

1. Identify the concept of setup costs in a business context.
2. Analyze each option regarding how it relates to setup costs.

Relevant Concepts

• Setup Costs: These are costs incurred to prepare for production, such as expenses related to putting a machine or equipment in place or preparing facilities.

Analysis and Detail

1. Business Insurance: This is typically an ongoing operational cost, not a direct setup cost.
2. Taxes: These are usually regular expenses and not specific to setting up an operation.
3. Raw Materials Cost: While this is crucial for production, it pertains to the operating phase rather than the setup phase.
4. Cleaning Previous Materials: This may be part of a preparation process but is still not directly a setup cost as it refers more to maintenance or operational procedures.
5. Machine Depreciation: This refers to the reduction in value of machinery over time; it does not require a setup.

Verify and Summarize

Out of the options provided, cleaning previous materials could loosely relate to preparation, but it doesn’t specifically classify as a setup cost. Therefore, none seem to fulfill the setup cost definition precisely.

Final Answer

None of the options directly exemplify a traditional setup cost. The closest option, if considering preparation, might be “Cleaning previous materials,” but it is not a standard case of setup costs generally associated with production initiation.