Ruby Is a Junior Sales Clerk Employed in the Sporting

question 33

Essay

Ruby is a junior sales clerk employed in the sporting goods department of Lear's, a large department store.Because of her work she gets to know Basinger, the supplier of tennis racquets to Lear's.After talking to Basinger for some time, she asks Basinger if it would agree to sell 100 tennis racquets to Lear's for 10 percent less than the price Lear's usually pays if Lear's would agree to send all its racquet stringing and repair business to Basinger.Basinger agrees to this proposal.That afternoon, Ruby advises the president of Lear's about the deal she has worked out with Basinger.The president says that while she likes the price reduction, Lear's cannot accept the commitment regarding the stringing and repair business.Lear's has an existing commitment to send all such business to someone else.Is Lear's bound by the contract negotiated by Ruby? Can Lear's accept the contract excluding the commitment to send Basinger all the stringing and repair business? Can Ruby have the contract ratified by Beaton's, a competing department store? Is Ruby bound personally?

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating how much contributes towards covering fixed costs and generating profit.

Gross Margin

A financial measurement that calculates the difference between a company’s total revenue and the cost of goods sold, expressed as a percentage of total revenue.

Variable Costing

An accounting method that records variable costs (costs that change with production levels) as product costs, while fixed costs are recorded as expenses in the period they are incurred.

Absorption Costing

A method in accounting that involves integrating all costs related to manufacturing, namely direct materials, direct labor, and all variable and fixed overhead expenses, into the pricing of a product.