An Equivalent Loan Helps One Think About the Results Associated

question 35

Essay

An equivalent loan helps one think about the results associated with financial lease analysis where the viewpoint is from a lessee's perspective, net of the lessor's position.Explain how this is true, and the equivalent loan concept's usefulness in lease analysis.

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Definitions:

Direct Material Used

Direct material used refers to the raw materials that are directly incorporated into a product being manufactured.

Materials Purchased

The total cost of raw materials bought for use in the production process.

Materials Quantity Variance

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

Standard Quantity

The expected amount of materials or input needed to produce a unit of output.