On June 1, Supertread Tire Company Entered into a Contract

question 18

Multiple Choice

On June 1, Supertread Tire Company entered into a contract to provide 100 tires per month to ZYX Cycle Company at $30 per tire for the next two years. The October shipment consisted of 100 badly defective tires. ZYX Cycle Company:

• A) can treat the whole contract as breached.
• B) can reject the October shipment if it cannot be cured in a timely manner by Supertread.
• C) cannot reject the October shipment since it is part of the installment series.
• D) must pay for the defective tires, but Supertread must provide 200 tires in November.

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Definitions:

Manufacturing Overhead

All manufacturing costs that are not directly associated with the direct labor or direct materials used in production.

Schedule of Cost

A detailed statement outlining the various components of total cost, including direct and indirect costs, used for analysis, planning, and control.

Goods Manufactured

The complete units of product that have been produced within a certain period of time.

Overapplied Overhead

A condition in which the overhead costs assigned to manufacturing exceed the real overhead costs that were incurred.