Which of the Following Agreements Is Supported by Consideration

question 10

Multiple Choice

Which of the following agreements is supported by consideration?

• A) Alice owns a sandwich shop and offers customers a loyalty card where a stamp is placed each time they buy a sandwich. Once a customer has purchased 10 sandwiches and has 10 stamps on his card, he receives a sandwich for free. Rob has ten stamps on his card and gets a free cheese sandwich.
• B) Rick works as a street cleaner in Nottingham. Every Monday, he sweeps in Lucy's neighbourhood. On New Year's Day, the streets are littered with firecrackers and beer cans. When Rick arrives the following Monday, Lucy offers him £20 to clean the pavement in front of her house.
• C) A wall in Tom's apartment is rotting away and will have to be replaced. Tom knows the source of the leak is coming from Dan's apartment, but knows that Dan will not pay unless he takes him to court. Instead, he tells Suzanne, who is easily intimidated, that the leak is coming from her apartment and threatens to sue her unless she pays £550.
• D) None of the options given is correct.

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Definitions:

Absorption Costing

A pricing approach that encompasses all costs related to production - including direct materials, direct labor, as well as both variable and fixed overhead expenses - within the product’s cost.

Absorption Costing

A method of accounting that includes all manufacturing costs, both variable and fixed, in the valuation of inventory and cost of goods sold.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.

Variable Costing

An accounting method that assigns only variable production costs to inventory and products; fixed costs are expensed as incurred.