Main Line vs Basinger

2271 WordsSep 18, 201210 Pages
TUI UNIVERSITY Cheryl E. Carter Module 3 Case Assignment ACC501 - Accounting for Decision Making Dr. Mary Dereshiwsky Due: 22 February 2010 25 June 2010 Main Line vs. Basinger In discovering accounting principles, there is discerning concepts that are not accounted for in regards to relevant cost. In 1991, the case of Main Line Pictures, Inc. verses actress Kim Basinger for breach of contract, the controversy with negotiations between Basinger and Main Line Pictures is an excellent example of the importance for accurate cost-profit decision making. Main Line had a verbal contract with Actress Kim Basinger to star in the film, "Boxing Helena" but had withdrawn from the project. The suit was heard in early…show more content…
Basinger’s salary does not contribute to any loss or profit for Main Line. It would be the same scenario as any other company hiring an expert or an amateur; adjustments would be made with fixed costs to accommodate the changed amount. In this case, Basinger is worth $3 million, so Main Line’s income statements should reflect her sign on amount of $1 million. In other words, the $3 million is an opportunity cost for Basinger starring in the film. Accordingly, Basinger would be able to get a salary at the $3 million rate anywhere, Main Line was only able to contract her services at $1 million which is the result representing the benefit that Basinger could realize by pursing the alternate course of action. In this case, Main Line would not be subject to a loss of profits but $3 million gain if she performed for the film. Even if Basinger’s services were considered at market value, their estimation would mean Main Line would have received a windfall if the film had been made with Basinger, but since Main Line was only paying Basinger $1 million in minimum compensation, and if Basinger’s marginal contribution to the film is $3 million, then it isn 't fair to force Basinger to reimburse Main Line for a windfall. The comparison of revenues for Basinger films with revenues for Fenn films is another irrelevant issue. It is easy to determine that the

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