Mitch Is a Director and Officer of Numero Uno, Inc

question 52

Essay

Mitch is a director and officer of Numero Uno, Inc. Mitch makes a decision to select a new supplier that results in an increase in costs for Numero Uno and its shareholders. In addition, the Numero Uno board considers a contract to outsource all of the custodial work for the firm with One-of-a-Kind Corporation. Mitch is a director and shareholder of One-of-a-Kind. If the shareholders accuse Mitch of breaching his fiduciary duty to the corporation for the loss on the supplier contract, what is Mitch's best defense? With regard to the One-of-a-Kind contract, what is Mitch's responsibility in this situation?

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Definitions:

Direct Labor Budget

A financial plan that estimates the cost of direct labor required to meet production goals.

Budgeted Production

The total number of units a company plans to produce in a specific period, according to its budget.

Sewing Labor

The work performed by individuals in creating garments or other items through sewing, often considered a direct labor cost in manufacturing.

Budgeted Balance Sheet

A financial statement projected for a future date, detailing the expected assets, liabilities, and equity of a business, and used for planning purposes.