Which Statement Is Correct About the "Guaranteed Residual Value

question 31

Multiple Choice

Which statement is correct about the "guaranteed residual value"?

• A) It is not included in the minimum lease payment calculation.
• B) Lessee assumes the risk of the property falling below the guaranteed amount.
• C) Lessor assumes the risk of the property falling below the guaranteed amount.
• D) It is an executory cost in the lease arrangement.

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Definitions:

Fixed Manufacturing Overhead

The sum of all the production costs that are not directly linked to the volume of production, such as salaries of managers and depreciation of equipment.

Absorption Costing

A method of costing that includes all manufacturing costs—both fixed and variable—in the cost of a product.

Break-Even

The financial point at which revenues exactly cover all costs, both fixed and variable, representing no profit or loss situation with different wording.

Sales Dollars

The total monetary value of sales within a specific time period.