June Purchases $8,000 of Goods from Will on Thirty Days

question 53

Multiple Choice

June purchases $8,000 of goods from Will on thirty days' credit, and Will assigns the account to Mark.If June finds the goods defective and only worth $6,000:

• A)she has no defense against full payment since the account was assigned.
• B)she only needs to pay Mark $6,000 if Mark had notified her of the assignment.
• C)Mark is entitled to the full $8,000 since he acquires rights greater than those of Will, who assigned the contractual rights to payment.
• D)she must pay $6,000 directly to Will regardless of whether Mark notified her of the assignment.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs in the cost of goods sold and treats fixed costs as period costs.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Manufacturing Margin

The difference between the cost of goods sold by a manufacturing company and its total sales, reflecting the gross margin specific to manufacturing operations.

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of goods sold.