Mandy and Donald Wish to Form a Corporation to Develop

question 34

Essay

Mandy and Donald wish to form a corporation to develop a $1,000,000 piece of property they own jointly. Prior to incorporation they hire an architect to design a building for their site. Upon completion of incorporation Mandy and Donald, who are the sole directors of the corporation, pass a directors' resolution ratifying the contract with the architect and seeking to make the corporation liable there under. Will they have any legal problems with this procedure?

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Definitions:

Variable Factory Overhead

Indirect manufacturing costs that vary with the level of production, such as utilities or materials used in the production process.

Direct Labor-Hours

The total hours worked directly on the production or manufacturing of goods, often used to allocate manufacturing overhead.

Denominator Activity

The level of activity used to compute the predetermined overhead rate.

Applied Factory Overhead

The portion of factory overhead costs assigned to each unit of production, based on an estimated or predetermined rate.