Which Statement Is Correct About the Bargain Purchase Option (BPO)

question 117

Multiple Choice

Which statement is correct about the bargain purchase option (BPO) ?

• A) It is cash that the lessee will receive at the end of the lease.
• B) It cannot be assumed that the BPO will be exercised.
• C) It is excluded in the minimum lease payment calculation.
• D) It means that it is almost certain that ownership will transfer to the lessee.

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Definitions:

Direct Material Cost

The cost of raw materials and components that are directly used in the production of a product.

Labor Quantity Variance

The difference between the actual hours worked and the standard hours allowed for the work performed, multiplied by the standard hourly wage rate.

Produced

The completed output of goods or services as a result of manufacturing or production processes.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost of those materials.