Which of the Following Statements Is False

question 56

Multiple Choice

Which of the following statements is false?

• A) Absent market imperfections, leases represent another form of zero-NPV financing available to a firm, and the Modigliani-Miller propositions apply: leases neither increase nor decrease firm value, but serve only to divide the firm's cash flows and risks in different ways.
• B) In a perfect market, the cost of leasing is equivalent to the cost of purchasing and reselling the asset.
• C) Each lease agreement can be tailored to fit the precise nature of the asset and the needs of the parties at hand.
• D) Features of leases will be priced as part of the lease payment. Terms that give valuable options to the lessee lower the amount of the lease payments, whereas terms that restrict these options will raise them.

Recognize the importance of capacity utilization in determining operating income and inventory valuation.

Understand the concept of manufacturing margin and contribution margin in variable costing.

Evaluate the implications of costing methods on performance evaluation and decision-making.

Identify circumstances under which selling price should cover variable costs and expenses.

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Definitions:

Special Order

A one-time order that is not part of the company's usual ongoing operations, often requiring a deviation from standard pricing and production procedures.

Future Costs

Future costs are expected or estimated costs that will be incurred in the performance of future activities or business operations, guiding budgeting and planning processes.

Sunk Cost

Costs that have already been incurred and cannot be recovered.

Common Fixed Costs

Common fixed costs refer to expenses that remain constant for a business over a period, regardless of the level of production or sales activity.