[Fixture Mishap] Samantha Owns a Hardware Shop That Also Sells

question 66

Multiple Choice

[Fixture Mishap] Samantha owns a hardware shop that also sells expensive bathroom fixtures. Maddie, a whiz with tools, purchased some expensive fixtures for her bathroom for $400. Samantha had only one set of the fixtures that Maddie wanted. Although Maddie noticed a slight discoloration on one of the faucets, she went ahead with the contract because Samantha indicated that she would remedy the situation should the problem become worse. Because they were friends and attended the same church, Samantha gave Maddie 90 days in which to pay. A month later, and before she paid for the fixtures, Maddie called Samantha and told her that the fixtures were corroding, the discoloration had worsened, and the fixtures looked terrible. Samantha said that she would provide Maddie replacements, but six months later they had not arrived, and Samantha told Maddie that they were on back order. At that point, Maddie purchased fixtures elsewhere for $500 and informed Samantha that she could pick up the corroded fixtures at her front door. Samantha picked up the fixtures, and although they were obviously defective, Samantha was able to resell them for $100. Samantha told Maddie that she would have gladly provided fixtures that would not corrode if she had only a bit more time, that Maddie should have given her a chance to do so, and that as far as Samantha was concerned, Maddie owed her $300.
-What is the likely effect of Samantha reselling the defective fixtures for $100?

• A) That is the only remedy Samantha will receive.
• B) The $100 will be deducted from the $400 Maddie owes leaving Maddie owing Samantha $300.
• C) Samantha will be allowed to keep the $100 and is still entitled to receive $400 from Samantha.
• D) Because of the extra work involved, Samantha will be required to deduct only half of the $100 from Maddie's debt, leaving Maddie owing $350.
• E) After the $100 is deducted, Samantha and Maddie will be required under the UCC to split the difference leaving Maddie owing $150.

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Definitions:

Variable Overhead Spending Variance

The difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on the actual level of production activity.

Standard Variable Overhead Rate

The predetermined rate used to allocate variable manufacturing overhead to individual units of production.

Standard Hours

The predetermined amount of time expected to complete a unit of work or job, serving as a benchmark for productivity and performance measurement.