Arnold and Doug Make a Contract for Arnold to Manufacture

question 41

Multiple Choice

Arnold and Doug make a contract for Arnold to manufacture five leather chairs of a specified design.Prior to their manufacture, the factory is destroyed in an accidental fire that is no one's fault.The chairs are available from other sources.Arnold:

• A)must supply the chairs, even if he must buy them elsewhere.
• B)is discharged from his duty to deliver the chairs by the destruction of the factory.
• C)has materially breached the contract if he fails to deliver the chairs.
• D)must return any money paid by Doug.

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Definitions:

Net Income

The profit or loss of a business after all expenses, taxes, and costs have been subtracted from total revenues.

Selling Price

The selling price is the amount a buyer pays to purchase a product or service from a seller.

Contribution Margin Ratio

The percentage of sales revenue remaining after variable costs are subtracted, indicating the portion contributing to covering fixed costs and generating profit.

Sales Mix

The relative proportions in which a company’s products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.