Instructional Case: Main Line vs. Basinger: A Case in Relevant Costs and Incremental Analysis Thomas L. Barton, William G. Shenkir and Brian C....

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QUESTIONS:

1.Should Main Lines maximum and minimum lost profit amounts be revised downward for the following? Why?

a.The domestic distribution revenues of $3 million because the deal had not been finalized.

b.The $800,000 of foreign pre-sales because they were "probable" not actual.

c.The loss of $2.1 million on the "Without Basinger" film.

2.Are the following relevant to the determination of lost profits to Main Line? Why?

a.Basinger's $3 million salary for "Final Analysis."

b.SFAS No. 53.

c.The comparison of revenues for Basinger films with revenues for Fenn films.

3.Is plaintiff's expert correct in not attempting to estimate revenues for "Boxing Helena" beyond

pre-sale amounts? Why?

4.Should Main Line's lost profits be adjusted downward to include an estimate of domestic

revenues for "Without Basinger" film? Would it have been valid to use the $1.7 million

advance against domestic revenues as the estimate? Explain.

5.Suppose Basinger had remained with the film and assume the $3 million profit shown in the

plaintiff expert's minimum damage calculation was correct. Is it reasonable to assume that Main Line's pretax cash position would have increased by $3 million or would some part of this have

been paid to others? Why?

6.If you disagree with the jury's lost profit assessment, briefly prepare one of your own.