The Total Production Costs at Kellner Machine Works Are $87,000

question 80

Multiple Choice

The total production costs at Kellner Machine Works are $87,000 out of which $45,000 represent fixed costs. Which of the following is representative of the variable costs incurred by the company?

• A) $35,000
• B) $42,000
• C) $45,000
• D) $87,000
• E) $132,000

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Definitions:

Captive Financial Lease

A leasing arrangement where the lessor is owned by or closely affiliated with the company that manufactures or sells the leased asset, often used to finance purchases from the parent company.

Sale and Leaseback

A financial transaction where an entity sells an asset and immediately leases it back from the buyer, allowing the seller to continue using the asset while freeing up capital.

Leasing Reasons

The motives or considerations for choosing to lease assets, such as financial flexibility, tax advantages, or capital preservation.

Lease-Buy Analysis

A financial comparison used to decide whether to lease or buy an asset based on cost effectiveness over the asset's useful life.