A Major Problem with Cost-Plus Contracts Is That They

question 106

Multiple Choice

A major problem with cost-plus contracts is that they

• A)include costs that do not follow GAAP.
• B)cause the supplier to take significant financial risks.
• C)require the supplier to use variable costing.
• D)create an incentive to allocate as much cost as possible to the goods produced under the contract.

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Definitions:

Athletic Shoes

Footwear designed for sports or other forms of physical exercise, offering varying levels of support, durability, and performance enhancements.

Warehouse Receipt

A document that provides proof of ownership of commodities (e.g., merchandise, grains, or metals) stored in a warehouse.

Bill Of Lading

A bill of lading is a legal document issued by a carrier to a shipper, detailing the type, quantity, and destination of the goods being transported.

Storage Warehouse

A large building used for storing goods in a secure and organized manner.