Consider Each of the Following Scenarios for Bunsen Suppliers Company

question 70

Essay

Consider each of the following scenarios for Bunsen Suppliers Company:
a. The common practice of Bunsen Suppliers is to obtain a written sales agreement. When an Anson Store called on the phone with an urgent need, however, Bunsen orally agreed to deliver goods in exchange for
$6,000, then immediately delivered these goods to Anson without a written agreement.
b. Bunsen Suppliers has a written agreement to deliver goods to Comfort Inc. for $110 per unit. The price will drop to $95 per unit for all units if Comfort purchases more than 1,000 units per month.
c. Bunsen Suppliers has a written agreement with Darwin Company to deliver 800 units of product each
Saturday afternoon. Darwin can alter the quantity or cancel a delivery any time before noon Saturday.
Required:
Determine if a contract exists for each of these scenarios and comment on revenue recognition issues.

---

Definitions:

Operations

The day-to-day activities involved in running a business, focusing on producing goods and services efficiently and effectively.

Variable Maintenance Costs

These are expenses that fluctuate in direct proportion to the level of activity or production, such as the costs of repairing machinery which increase with more intensive use.

Equipment Services Department

A division within an organization responsible for maintaining, repairing, and ensuring the operational efficiency of machinery and equipment.

Fabrication

The process of constructing products by combining diverse materials through various manufacturing techniques.