Russell and Joe Make a Contract for Russell to Manufacture

question 23

Multiple Choice

Russell and Joe make a contract for Russell to manufacture five leather chairs of a specified design. Prior to their manufacture, the factory is destroyed in an accidental fire that is no one's fault. Even if the chairs are available from other sources:

• A) Russell must supply the chairs, even if he must buy them elsewhere.
• B) Russell's duty to deliver the chairs is discharged by the destruction of the factory.
• C) Russell has materially breached the contract if he fails to deliver the chairs.
• D) Russell must still manufacture the chairs and Joe must wait until Russell's factory is rebuilt.

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Definitions:

Job Order Costing Method

A costing method used to accumulate costs of production by job or order, suitable for customized or unique products and services.

Service Organization

A business that provides professional services or expertise to clients, rather than tangible goods.

Period Costs

Expenses that are not directly tied to the production process and are expensed in the period they are incurred, such as sales and administrative expenses.

Production Requirements

The specific inputs and conditions needed for the production process to create goods or services.