Explain What Output and Requirements Contracts Are

question 19

Essay

Explain what output and requirements contracts are.
In some cases, the parties may state the quantity of goods covered by their sales contract in an indefinite way. Contracts that obligate a buyer to purchase a seller's output of a certain item or all the buyer's requirements of a certain item are commonly encountered. These contracts caused frequent problems under the common law because of the indefiniteness of the parties' obligations. If the seller decided to double its output, did the buyer have to accept the entire amount? If the market price of the item soared much higher than the contract price, could the buyer double or triple its demands?

Evaluate management strategies in response to volume variance issues.

Grasp the theoretical underpinnings and criticisms of standard costing systems and flexible budgets.

Understand the components and purposes of control systems within management accounting.

Distinguish between different types of variances, including cost, labour, and material variances.

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Definitions:

Credit Periods

The duration of time allowed by a seller for a buyer to pay for a product or service after the sale has been made, usually expressed in days.