Raj Agrees to Act as a Sales Agent for Service

question 38

Multiple Choice

Raj agrees to act as a sales agent for Service Company on a commission basis. Their contract stipulates six-months' notice of termination. The firm ends the deal without notice. If Raj seeks payment of commissions on sales for the six months following the termination, a court is most likely to hold that

• A)the amounts accrue to Service, which had the power to end the agency.
• B)any compensation on sales during the period should be split equally.
• C)Raj can recoup expenses but no profit.
• D)Raj is entitled to the commissions.

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Definitions:

Net Operating Income

Earnings from a company's core business operations, excluding deductions for interest and taxes.

Gross Margin

represents the difference between revenue and cost of goods sold divided by revenue, showcasing the percentage of sales that exceeds the cost of goods sold.

Arbitrary Allocation

The distribution of indirect costs to specific cost objects without a clear or direct basis, often based on convenience or convention rather than actual usage or benefits derived.

Common Cost

A cost that is incurred to support a number of cost objects but that cannot be traced to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot’s wage is caused by any one passenger taking the flight.