Dexter claimed that during the first 15 months of the contract the company had actually lost 10 percent on the sale of belt systems. They further stated that they would be happy to continue with the contract if they could earn just 5 percent on the remaining contract sales. Delta management is not pleased with the Dexter Manufacturing proposal. Management of the Delta Salt Mining Company is considering litigation to force Dexter to honor the remaining terms of the agreement or to pay the damages caused by the breach of contract. In order to get some idea about the various issues and costs associated with legal action, Deltas management committee has asked you, as head of the accounting department, to perform some analyses to help with the decision. In particular, the committee would like to know the following: 

a. How much in losses do you think Dexter may have experienced on the current contract so far? How much more in losses might Dexter experience if the contract runs for its intended life? What information would you like to have from Dexter to do further analysis on this issue?

b. What extra costs might Delta experience if it goes along with the Dexter proposal?

c. What costs, other than the ones already mentioned, might Delta want to consider before it went forward with litigation against Dexter Manufacturing?

d. If Delta did sue Dexter, what would be the basis for its damages in the case?

e. Are there any non accounting issues Delta should consider in this case? If so what are they?

Answer rating: 100% (QA)

Analysis for Delta Salt Mining Company a Dexters Potential Losses and Information Needed Dexters Claimed Loss 10 on sales for the first 15 months Further Analysis We cannot definitively determine Dext... View the full answer