If the Implicit Rental Price of an Airliner Is $200,000

question 161

Multiple Choice

If the implicit rental price of an airliner is $200,000 per year, the interest rate is 5 percent, and depreciation is $60,000 per year, then the purchase price of the airliner is

• A)$1,300,000.
• B)$4,000,000.
• C)$2,800,000.
• D)$4,060,000.
• E)$5,200,000.

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Definitions:

Variable Overhead

Indirect production costs that fluctuate with the level of output, such as utilities or materials used in the manufacturing process.

Efficiency Variance

A measure used in cost accounting to evaluate the efficiency of resource usage, calculated as the difference between actual usage and the standard or expected usage.

Materials Price Variance

The variance between the standard cost and the actual expense of materials, calculated by multiplying the amount bought.

Direct Materials

Raw materials that are directly traceable to the production of a specific product, representing a significant portion of the costs of goods sold.