Murray Lumber had an exclusive three-year supply agreement with Stella Construction. The contract called for lumber sales of $4,400,000 per year. After one year, Stella Construction canceled the contract without cause. The court found Stella Construction liable under the contract. Murray Lumber had average gross profits of 40 percent and average net income of 10 percent of sales. Murray Lumber's operating expenses average 70 percent fixed. The damages from the loss of this contract would be: A. $2,728,000. B. $8,800,000. C. $1,364,000. D. $2,480,000.
Murray Lumber had an exclusive three-year supply agreement with Stella Construction. The contract called for lumber sales of $4,400,000 per year. After one year, Stella Construction canceled the contract without cause. The court found Stella Construction liable under the contract. Murray Lumber had average gross profits of 40 percent and average net income of 10 percent of sales. Murray Lumber's operating expenses average 70 percent fixed. The damages from the loss of this contract would be: A. $2,728,000. B. $8,800,000. C. $1,364,000. D. $2,480,000.
Chapter16: Accounting Periods And Methods
Section: Chapter Questions
Problem 26CE
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Murray Lumber had an exclusive three-year supply agreement with Stella Construction. The contract called for lumber sales of $4,400,000 per year. After one year, Stella Construction canceled the contract without cause. The court found Stella Construction liable under the contract. Murray Lumber had average gross profits of 40 percent and average net income of 10 percent of sales. Murray Lumber's operating expenses average 70 percent fixed. The damages from the loss of this contract would be:
| A. |
$2,728,000.
|
|
| B. |
$8,800,000.
|
|
| C. |
$1,364,000.
|
|
| D. |
$2,480,000. |
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