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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.

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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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