Ace Computers (AC)is a Manufacturer

question 54

Multiple Choice

Ace Computers (AC) is a manufacturer.It entered into a contract with a retailer,Reliable Computer (RC) for the sale of 100 new XYZ model computers at $1,000 each,for delivery in 6 months.AC would thus make a profit of $50,000.Six months later however,the XYZ model has become almost obsolete;its market price is only $100 at that time.RC refuses to accept or pay for those computers.If AC sues,how much should it be entitled to in damages? (Ignore any incidental expenses or cost savings to AC. )

• A) Nothing;when the XYZ model became almost obsolete,this excused RC from the contract.
• B) $50,000,the profit AC would have made had RC not breached the contract.
• C) $90,000,the difference between market price and contract price.
• D) $140,000,the lost profit plus the difference between market price and contract price.

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Definitions:

Financial Statements

Reports that summarize the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Managerial Accounting

A branch of accounting focused on providing financial information within a company to assist in decision-making, planning, and control.

Decision Makers

Individuals or entities that have the authority to make choices or form policies within organizations, significantly impacting its direction and operations.

Days' Sales

A financial metric that estimates the average time it takes for a company to turn its inventory into sales.