Cost allocation methods that provide the most accurate full cost information for financial reporting, also provide the most accurate information for cost-plus contracts.

Question

Quizplus · Accepted Answer

Cost allocation methods that provide the most accurate full cost information for financial reporting, such as activity-based costing, also provide the most accurate information for cost-plus contracts. This is because these methods allocate costs based on the activities that drive them, providing a more precise understanding of the resources required to complete a task or project, which is necessary for determining the full cost of a project and setting a fair price for a cost-plus contract.

Cost Allocation Methods That Provide the Most Accurate Full Cost