AASB 117 Defines a Non-Cancellable Lease to Mean a Lease

question 18

Multiple Choice

AASB 117 defines a non-cancellable lease to mean a lease that is cancellable in limited circumstances only if:

• A)the lessor cancels with the permission of the lessee.
• B)some remote contingency occurs.
• C)the lessor incurs a penalty large enough to discourage cancellation.
• D)the lessee can cancel the lease at any time without any significant impediment or economic disincentive.

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Definitions:

Variable Production Costs

Costs that fluctuate with the level of output, including expenses like raw materials and direct labor.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including lease payments, wages, and insurance fees.

Gross Profit

The difference between a company's sales revenue and its cost of goods sold, representing the profit made before accounting for operating expenses.

Special Order

A one-time customer order often involving unique specifications, which might not fit into the company's standard offerings.