1) Frank Dobbins (a homeowner) orders a furnacefrom ALPINE on Order #1. The customer pays $1,000 – this is the retailprice of the furnace. The customer does not pay tax because they are outof state. The product is advertised with “free shipping.” ALPINE has 3 of these furnaces in inventory with an average cost of$500 each. A freight carrier (Carrier A) picks up the furnacefrom ALPINE’s warehouse and signs for the shipment confirming that theproduct is in good condition. The freight carrier delivers the furnace to thecustomer. The freight carrier charges $100 to deliver the furnace to thecustomer.
Question 1A) Whatexpenses has Alpine accrued on this order (direct costs only)?
Question 1B) What isthe gross profit?
2) The next day, Frank Dobbinscontacts ALPINE to report damage to his furnace. He signed thedelivery receipt noting that his unit was damaged. He says that he wantsto return the furnace and receive a new furnace from ALPINE. ALPINE schedules a pick-up of the furnace with the same freightcarrier that delivered it. The carrier (Carrier A) picks it up anddelivers it back to the ALPINE warehouse, at a shipping cost of $100. ALPINE estimates that 10 percent of the furnace is damaged, but thatit can be resold as is with a damage allowance off the retail price. ALPINE photographs the unit and places it online for sale as ascratch-n-dent unit for $900. ALPINE ships Frank Dobbins a secondfurnace (ALPINE creates a second order to do so, Order# 2), but does notcharge Frank Dobbins. Alpine ships the replacement furnace with Carrier Bfor $110. ALPINE’s claims processorsees that she needs to file a damage claim for Frank Dobbin’s returnedfurnace. (Note that most freightcarriers will not pay the shipping bills of other carriers.)
Question 2A) What total amount shouldshe file the claim for, and what specific costs does that include?
Question 2B) Who does she file the claim with?
3) Frank Dobbins received his second furnace. He noticesthe unit is scratched, gets frustrated and refuses the furnace. Thecarrier contacts ALPINE for disposition. ALPINE asks thatCarrier B returns the furnace to ALPINE free astray, meaning at nocharge. Carrier B complies and returns the furnace to ALPINE. Frank Dobbins says he needs to cancel the order and buy his unit locallybecause he is too cold to wait for a third unit. Alpine complies andcancels his order. ALPINE receives Frank’s second furnace back, andit has minor damage, estimated at 3 percent. Alpine adds the product toits SND inventory.
Question 3A) By what amount would the account SNDinventory account be increased or decreased? (Note: ALPINE records inventoryat Lower of Cost or Market.)
Question 3B) How much is Frank refunded?
Question3C) Should ALPINE file a second claim, and if so, with whichcarrier?
Question 3D) If ALPINE filed a claim, what costs would theclaim be filed for (please detail)?
Questions 3E) Does anything else need to occur to eliminateany negative financial impact on ALPINE for these two order exceptions?