Main Line vs Basinger
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 Main Line had a verbal contract with Actress Kim Basinger to star in the film, "Boxing Helena" but had withdrawn from the project.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 1993 in the Superior Court of the State of California, for the County of Los Angeles. The analysis of plaintiff and defendants’ arguments showcased in this suit indicates that regardless of the business, understanding and documenting the affects of decisions are in terms of costs and profits. The amount of Main Line’s loss can never be determined with pinpoint accuracy, since they did not properly utilize statement of financial accounting standards (SFAS 1981) and Main Line would not have made the profit that they indicate they would have.
Main Line’s maximum and minimum lost profit amounts should not be revised downward for both domestic distribution and foreign pre-sales for the film, simply because they were sunk costs regardless if they made the film or not. The domestic distribution revenues of $3 million were an estimate future cost but the deal had not been finalized at the time Basinger withdrew from the contract. Likewise, the foreign pre-sales were not relevant because, these cost were an approximation based on the future cash flows from minimum and maximum profit loss from domestic distribution would have been made regardless of whether Bassinger starred in the film or not, because they were needed to secure
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 1993 in the Superior Court of the State of California, for the County of Los Angeles. The analysis of plaintiff and defendants’ arguments showcased in this suit indicates that regardless of the business, understanding and documenting the affects of decisions are in terms of costs and profits. The amount of Main Line’s loss can never be determined with pinpoint accuracy, since they did not properly utilize statement of financial accounting standards (SFAS 1981) and Main Line would not have made the profit that they indicate they would have.
Main Line’s maximum and minimum lost profit amounts should not be revised downward for both domestic distribution and foreign pre-sales for the film, simply because they were sunk costs regardless if they made the film or not. The domestic distribution revenues of $3 million were an estimate future cost but the deal had not been finalized at the time Basinger withdrew from the contract. Likewise, the foreign pre-sales were not relevant because, these cost were an approximation based on the future cash flows from minimum and maximum profit loss from domestic distribution would have been made regardless of whether Bassinger starred in the film or not, because they were needed to secure
References: Barton, Thomas L, Shenkir, William G, Marinas, Brian C. (1996) Instructional case - Main Line vs Marshall, D. H., McManus, W. W. & Viele, D. F. (2002). Accounting: What the numbers mean, 5th ed Relevant Costs for Decision Making. (n.d.). SBA.pdx.edu, Retrieved June 23, 2010 from: http://www.sba.pdx.edu/faculty/michaels/360/11ch11/sld001.htm Samuelson, W. F. & Marks, S. G. (1995). Managerial economics, 2nd ed. Orlando, FL: The Dryden Press