Marlowe Company Currently Leases a Delivery Truck from Burton Enterprises

question 149

Multiple Choice

Marlowe Company currently leases a delivery truck from Burton Enterprises for a fee of $250 per month plus $0.40 per mile. Management is evaluating the desirability of switching to a modern, fuel-efficient truck, which can be leased from Goliath, Inc., for a fee of $600 per month plus $0.05 per mile. All operating costs and fuel are included in the rental fees. In general, a lease from

• A)Goliath, Inc., is economically preferable to a lease from Burton Enterprises regardless of the monthly use.
• B)Burton Enterprises is economically preferable below 1,000 miles per month.
• C)Burton Enterprises is economically preferable to a lease from Goliath, Inc., regardless of the monthly use.
• D)Burton Enterprises is economically preferable above 1,000 miles per month.

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Definitions:

Materials Quantity Variance

The difference between the actual amount of materials used in production and the standard amount expected to be used, multiplied by the standard cost per unit.

Raw Materials Price

The cost of raw materials required in the manufacturing process, a critical factor in the overall production cost and pricing strategy.

Variance

The difference between a planned, budgeted, or standard amount and the actual amount incurred or realized.

Revenue Variance

The difference between actual revenue earned and expected revenue, often used in budgeting and financial analysis.