Answer the Question. -You Must Decide Whether to Buy a New Car for New

question 234

Multiple Choice

Answer the question.
-You must decide whether to buy a new car for $28,000 or lease the same car over a three-year period. Under the terms of the lease, you make a down payment of $2000 and have monthly
Payments of $350. At the end of three years, the leased car has a residual value (the amount you
Pay if you choose to buy the car at the end of the lease period) of $15,000. Assume you sell the new
Car at the end of three years at the same residual value. Compare the cost of leasing and buying the
Car.

• A)Buy $13,000, lease $14,300
• B)Buy $13,000, lease $14,600
• C)Buy $14,000, lease $14,600
• D)Buy $13,000, lease $14,900

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Definitions:

Indirect Materials

Materials used in the production process that cannot be directly traced to a finished product.

Employer Payroll Taxes

Taxes that employers are required to pay on behalf of their employees, including Social Security and Medicare taxes in the United States.

Manufacturing Overhead Applied

The portion of manufacturing overhead costs allocated to each unit of production.

Job Cost System

An accounting method used to track the expenses of a specific job or project and compare those expenses to the project’s revenue, helping in assessing profitability.