An Illegal Provision in a Contract

question 18

Multiple Choice

An illegal provision in a contract:

• A) causes the entire contract to be void.
• B) causes the entire contract to be rescinded.
• C) can be ignored by the parties in their performance of the remaining legal provisions of the contract.
• D) can be ignored by the parties, because an illegal provision in a contract is not deemed substantial.

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing a product, such as utilities, maintenance, and factory management salaries.

T-Accounts

Diagrammatic representations used in accounting to visualize debits and credits for individual accounts.

Direct Labor-Hours

A measure of the total hours of work directly involved in manufacturing goods or providing services.

Predetermined Overhead Rate

This is a calculated figure used to allocate manufacturing overhead costs to products based on a relevant activity such as machine hours or labor hours, set before the accounting period starts.