When Parties to a Contract Mutually Agree to Cancel an Old

question 12

Multiple Choice

When parties to a contract mutually agree to cancel an old contract and replace it with a new one, which of the following is true?

• A)To be enforceable, there must be added features in the new contract benefiting both parties.
• B)One party's past performance under the original contract is sufficient consideration for the new contract.
• C)The new contract is void.
• D)Neither party has a right to make changes to the original contract.

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Definitions:

Equivalent Units

An idea in cost accounting that involves allocating expenses to goods that are partially finished, measured as if the goods were fully completed.

Conversion Costs

The combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Predetermined Overhead Allocation Rate

A calculated rate used to apply manufacturing overhead costs to specific jobs or production units based on estimated costs and activities.

Direct Labor Cost

The expense incurred by companies for wages, benefits, and other costs directly associated with the employment of workers who physically produce a product or service.