Cost-plus contracts negotiated with suppliers of the government usually involves ________.
A) a price that allows the contractor to break-even
B) a price that covers the contract's cost plus other noncash benefits
C) the supplier's cost to perform the contact (provide the product or service) plus a fee
D) a price that covers the contractor's direct costs plus an amount to cover overhead costs

Question

Quizplus · Accepted Answer

Cost-plus contracts typically involve the supplier's cost to perform the contract (provide the product or service) plus a fee. This type of contract is often used when the government wants to ensure that the supplier is reimbursed for all costs incurred in performing the contract and wants to provide some incentive for the supplier to control costs. Choice A is incorrect because the contract price may be above the break-even point. Choice B is also incorrect because the noncash benefits are not typically included in the contract price. Choice D is incorrect because the price typically includes a fee, not just direct and overhead costs.

Cost-Plus Contracts Negotiated with Suppliers of the Government Usually Involves