Laurette Has Entered into a Contract with Jackson to Purchase

question 13

Multiple Choice

Laurette has entered into a contract with Jackson to purchase his retail music shop. Jackson's lease on the existing building (which is in an excellent location) has five years remaining. If Laurette wants the lease to be part of the business sale ________.

• A) she should include a clause in the sales contract in which Jackson agrees to assign to her/his rights and obligations under that lease
• B) she should notify the landlord of Jackson's assignment of the lease agreement to her
• C) A and B are correct.
• D) None of the above. Because Jackson does not actually own the building, he can transfer no rights to it to Laurette.

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Definitions:

Mark-Up Percentage

Mark-up percentage is the ratio between the cost of a good or service and its selling price, expressed as a percentage over the cost, indicating the profit margin.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment compared to its initial cost.

Cost-Plus Pricing

A pricing approach that involves adding a consistent percentage or fixed sum to the production cost of a product or service to set its sale price.

Absorption Cost

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.