Inga Runs a Swedish Health Spa in Connecticut

question 49

Multiple Choice

Inga runs a Swedish health spa in Connecticut.She orders 100 loofah sponges from a company in California.They are sent "F.O.B.Hartford, Connecticut," but they never arrive at Inga's.What consequence?

• A)Inga has to pay anyway since it was a destination contract.
• B)The California company is required to bear the loss since the sponges had not yet reached the F.O.B.point.
• C)The California company and Inga will have to split the loss since they did not specify in their contract when ^{the risk of loss would pass to Inga.}
• D)It cannot be determined from the information given who has the risk of loss.

---

Definitions:

Break-even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in no profit or loss.

Variable Cost

Costs that change in proportion to the level of production or sales activity, such as raw materials and direct labor costs.

Fixed Costs

Fixed overheads that stay the same no matter how much is produced or sold, including rental fees or staff salaries.

Margin of Safety

The difference between actual or projected sales and the break-even point, indicating the amount by which sales can drop before a business incurs a loss.