A Principal Is Contractually Bound to a Third Party If

question 61

True/False

A principal is contractually bound to a third party if the agent acts without any authority but the principal ratifies the contract.

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Definitions:

Standard Cost Accounting System

A system that assigns expected costs to products to estimate selling prices and cost control, allowing variance analysis for actual costs incurred.

Unfavorable Variances

Differences between actual and expected outcomes that negatively affect a business's financial performance.

Favorable Variances

Differences between actual and budgeted financial performance that result in a better-than-expected financial position.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, providing a more useful tool for performance evaluation.