Question

5. The lease versus purchase analysis - Part 2 Which Is Better: To Lease or To Buy? A car buyer has two financing alternatives: to lease or to purchase. It is important to evaluate all the options and analyze the consequences of lease versus purchase decision. The understanding of a comparative worksheet that analyzes the automobile lease versus purchase decision will help in making an informed choice. How should a lease-versus-purchase analysis be conducted? How can this worksheet be applied to help you or someone else make their financing decision? Consider the following scenario: Should Samantha Lease or Purchase? Samantha is considering the purchase of a Toyota Camry and has negotiated a final price of $17,950. She's trying to decide whether to lease or purchase the vehicle. • If she leases, she'll have to pay a $600 security deposit, a capital cost reduction (down payment) equal to 10% of the vehicle's cost, and monthly payments of $318 over the three-year term of the closed-end lease. The Camry will have a residual value of $7,180. . On the other hand, if she buys the Camry, she'll have to make a 10% down payment, pay sales tax equal to 7% of the vehicle's price, and make monthly payments of $477 on a three-year loan that charges 4% interest. • Be aware that funds used as down payments and security deposits incur an opportunity cost of 4%, as they could have earned interest for Samantha over the period of the lease or loan.

Answer 1

Requirement 1
Product Finished :
Units of Finished products Manfactured		1175	Units
Requirement 2
Standard Finished product for direct material used :
Quantity of Direct materials used (A)	4900	lbs
Standard direct materials per unit of finished product (B)	4	lbs
Standard Finished product for direct material used(A/B)		1225	Units
Requirement 3
Deficiency of Finished products for materials used :
Units of Finished products Manfactured		1175
Standard Finished product for direct material used		1225
Deficiency of Finished products for materials used		50	Units
Requirement 4
Standard cost for Direct Materials :
Direct materials quantity variance—unfavorable (A)		$   1,140.00
Deficiency of Finished products for materials used (B)		50	Units
Standard cost for Direct Materials (A/B)		$        22.80