A Collateral Promise Is One Made by a Third Party

question 56

True/False

A collateral promise is one made by a third party to assume the debts or obligation of a primary party to a contract if the primary party does not perform.

---

Definitions:

Fixed Manufacturing Overhead

Regular, fixed costs associated with operating a manufacturing facility, including costs like rent, depreciation, and property taxes.

Machine-Hours

A measure of production activity that represents the total hours machines are operating over a given period.

Overapplied

A scenario in which the overhead attributed to products or services surpasses the real overhead expenses.

Manufacturing Overhead Cost

Expenses related to the manufacturing process that are not directly tied to the production of goods, such as utilities and rent for the manufacturing facilities.