ABC Company Manufactures a Contraption Meant to Enable a Rider

question 6

Multiple Choice

ABC Company manufactures a contraption meant to enable a rider to fly behind a ski boat.After a few months,ABC begins to hear of injuries when riders crash into water or boats.In hopes of escaping liability,the president of ABC Company decides to discontinue business and sell all assets to XYZ Company.The president of XYZ Company is excited to purchase the assets at a bargain price and help ABC avoid liability based upon the assertion of the president of ABC that XYZ cannot legally be held liable for the flying accidents.Which of the following is true in a majority of states applying the traditional successor liability rule?

• A) XYZ Company will not be held liable for the accidents so long as there is no contractual agreement by which it agrees to accept liability.
• B) XYZ Company will only be held liable if it continues to manufacture the same product lines as ABC.
• C) XYZ Company will only be held liable if it keeps the same tax number as ABC Company.
• D) XYZ Company will likely be held liable for the accidents based upon the transaction being entered into wrongfully in order for ABC Company to escape successor liability.

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Definitions:

Direct Materials

Basic substances that can be directly linked to the production process of a good.

Direct Labor

Labor costs that can be directly traced to the production of specific goods or services, such as wages for assembly line workers.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to products or job orders, calculated before the period begins based on estimated costs and activity levels.

Manufacturing Overhead

All indirect manufacturing costs, including indirect labor, materials, and other expenses not directly tied to the production of goods.