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?

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michaelt 12 hours ago | parent [-]

> 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.

	▲	falcor84 4 hours ago \| parent [-]
		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?