In a Firm Fixed Price Contract, If the Supplier Increases

question 11

True/False

In a firm fixed price contract, if the supplier increases its contract price in anticipation of rising costs, and the anticipated conditions do not occur, then the purchaser has paid too high a price for the good or service.

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Definitions:

Operating Capacity

The maximum output or the level of service that a company can achieve with its current resources under normal conditions.

Dividend Payout Ratio

A financial metric that shows what percentage of a company's earnings are distributed to shareholders as dividends.

Additional Debt

Borrowing more funds in addition to existing debt, which can increase a company's leverage and financial risk.

Operating Capacity

The maximum output that a company can produce under normal conditions within a given period using its existing resources.