Midstates Utility Corporation Contracts with North American Energy Company to Buy

question 7

Essay

Midstates Utility Corporation contracts with North American Energy Company to buy 50,000 gallons of heating oil.North American agrees to deliver the oil in five equal installments between October 1 and the follow?ing March 15.The winter is the warmest on record,however,and after the last agreed delivery,Midstates has accepted only 30,000 gallons of the oil.When North American tenders the rest of the oil,Midstates refuses to take it,citing the weather and claiming to be acting in good faith.Will North American succeed in a suit against Midstates for breach of contract?

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Definitions:

Product Costs

The costs directly attributable to the manufacturing of a product, including direct labor, direct materials, and manufacturing overhead.

Period Costs

Expenses that are not tied directly to the production process and are instead recognized as expenses in the period in which they are incurred.

Direct Materials Cost

The expenditure on raw materials that are directly used in the manufacturing of a product.

Direct Labor Cost

Expenses that are directly attributable to the manufacturing of products, including wages of workers who physically convert materials into finished goods.