Lewis Is a Wealthy Entertainer

question 41

Multiple Choice

Lewis is a wealthy entertainer.While watching a telethon that was aimed at raising money for medical research,he was overwhelmed by a sense of grief and sorrow.He consequently picked up the telephone,dialed the number on the screen,and promised to donate $5 million within one month.The volunteer on the other end of the line thanked Lewis and assured him that "the money will be put to good use." Two days later,before Lewis had sent in a cheque,the telethon organizers announced that,because of the public's overwhelmingly positive response,and in particular because of Lewis's generous promise,their organization would be able to build a research facility that they previously believed was beyond their budget.They also announced that they would name the facility the Jerry Medical Research Park,after Thomas Jerry,a local surgeon who recently had died.Lewis became very angry.He had long hated Jerry and he was horrified at the thought of paying for a building named in his enemy's honour.He therefore informed the telethon organizers that he had changed his mind and that he would not be sending any money.The telethon organizers have now sued for breach of contract.Which of the following statements is TRUE?

• A)Lewis is contractually obliged to honour his promise if the telethon organizers can prove that,in reliance upon his promise,they already have hired architects and contractors to build the new facility.
• B)Lewis is required to honour his promise as a result of the doctrine of promissory estoppel.
• C)There is no contract in this case because Lewis merely promised to pay,and did not actually pay any money,and therefore did not provide consideration.
• D)Lewis will be contractually obliged to honour his promise as long as the telethon organizers agree to drop Thomas Jerry's name from the new research park.
• E)Lewis is not required to pay because his promise was a gratuitous promise.

Determine the minimum acceptable transfer price from the standpoint of a selling division.

Evaluate how transfer prices affect divisional and overall corporate financial performance.

Analyze the impact of sales to external customers versus internal divisions on contribution margin.

Understand the concept of transfer pricing in intra-company transactions.

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Definitions:

Linea Alba

A fibrous structure that runs down the midline of the abdomen, forming an important anatomical landmark and serving as the attachment for certain abdominal muscles.

Serratus Anterior

A muscle located on the side of the thorax that assists in the upward movement of the arms and stabilizes the scapula.

Rectus Abdominis

A long muscle that runs vertically on each side of the anterior wall of the human abdomen, responsible for flexing the lumbar spine.

External Oblique

A large, flat muscle on the outside of the abdomen, essential for trunk rotation and lateral flexion of the torso.