Alice Is Browsing in a Commercial Art Gallery When She

question 7

Multiple Choice

Alice is browsing in a commercial art gallery when she sees a painting that she likes. Arthur, who is the manager of the gallery, tells her that in his opinion the painting is a genuine Leroy Neiman work. Based upon that representation, Alice buys the work for $5,000. She later discovers that the painting is only a cheap copy of the original that is worth no more than $50. Arthur has:

• A) breached an express warranty to Alice that the painting is a Neiman work.
• B) breached the warranty of merchantability.
• C) not breached a warranty because he was merely expressing his opinion.
• D) breached an express warranty, the warranty of merchantability, and the warranty of fitness for a particular purpose.

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Definitions:

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a produced unit.

Unit Product Cost

The total cost, including materials, labor, and overhead, divided by the number of units produced.

Year 2

Refers to the second year of a time-related context or sequence, not a standalone key term without additional context.

Contribution Margin

The amount of revenue remaining after subtracting variable costs, indicating how much contributes towards covering fixed costs and generating profit.