Griffith Manufacturing Ships 40 Crates of Goods by Trusty Shipping,a

question 35

Multiple Choice

Griffith Manufacturing ships 40 crates of goods by Trusty Shipping,a common carrier.Trusty offers Griffith a shipping rate of $725 for a limited liability of $5,000 or a rate of $975 for full liability for any harm to the goods.Griffith chooses the $725 rate.In transit,Trusty's driver has an accident during an ice storm and all of Griffith's goods are destroyed,causing a loss of $12,000.If Griffith sues Trusty,

• A)Trusty will be liable for only $5,000 because a common carrier is allowed to limit its liability by contract.
• B)Trusty will be liable for the full $12,000 because common carriers have strict liability.
• C)Trusty will automatically be liable for the full $12,000 under the Carmack Amendment.
• D)Trusty is subject to normal bailment rules and can escape liability for any damage to the goods by proving that it exercised due care of the property and that the loss was caused by an act of God.

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Definitions:

Total Fixed Cost

The sum of all costs that do not change with the level of output or sales in the short term, such as rent and salaries.

Activity Bases

Metrics used to allocate costs based on various activities or drivers that cause costs to be incurred.

Food Costs

The total cost incurred by a business to produce the food items it sells.

Units-Of-Production Depreciation

A method of depreciation based on an asset's usage, activity, or units of production rather than the passage of time.