Bailey CoAnd Spryt Bros

question 40

Multiple Choice

Bailey Co.and Spryt Bros.enter into a contract for the manufacture and sale of 400 lawn chairs.If both parties agree that a modification is necessary,

• A)the surest way to modify the contract is to liquidate it.
• B)they may not do so without court supervision.
• C)an agreement to rescind the contract will terminate the contractual rights of Bailey Co.and Spryt Bros.if neither of them had completed their obligations.
• D)courts will generally not enforce a cancellation and modification of a contract unless one party received inadequate consideration under the original contract.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the manufacturing of a product in a cost-effective manner.

Manufacturing Overheads

Indirect costs related to manufacturing that cannot be directly traced to specific products, including utilities, maintenance, and factory equipment depreciation.

Work-in-Process Inventory

Items that are partially completed in the production process; they are not yet finished goods but are no longer raw materials.

Schedule of Cost of Goods Sold

A detailed statement showing the direct costs, indirect costs, and total cost of goods that have been sold during a specific period.