Phillip,Robert,and Mike,are the Directors of Smithfield Warehouse Limited

question 34

Essay

Phillip,Robert,and Mike,are the directors of Smithfield Warehouse Limited.The three directors had decided to increase their warehouse space,and were looking for a suitable property to lease.The bylaws of the corporation with respect to entering a lease required such a document to be ratified by a two-thirds majority of the directors.Each director was scouting for possible properties when Phillip chanced upon a warehouse which appeared to suit their purposes.Phillip entered into a lease with the warehouse property owner on behalf of Smithfield Warehousing Limited,telling the owner that before the lease would be valid that it must be approved by his company.To this the owner of the warehouse agreed.Robert viewed the property the following day,and paid the $1 000 deposit on rent that was required under the lease.Robert paid this out of his own pocket,and then wrote himself a company cheque for reimbursement.At a later meeting,the three brothers decided that a property found in the meantime by Mike was more suitable for their purposes,and informed the warehouse owner that they did not intend to pass a resolution approving the lease,and that the deal was off.The warehouse owner,who was aware that the three brothers represented all the directors,claimed that the company ratified its lease by the actions of the two directors.Discuss the issues raised by this case and render a decision.

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Definitions:

Activity Rates

Predetermined charges used in activity-based costing to allocate costs to products or services based on the activities required for their production.

Quality Inspection

The process of examining and testing goods or services to ensure they meet specified standards of quality before they are sold or delivered.

Machining

The process of removing material from a workpiece to create a desired shape or finish using tools and machines such as lathes, mills, or drills.

Product Costs

Expenses directly linked to the production of goods, covering materials, labor, and manufacturing overhead costs.