From the course: Accounting Foundations: Cost-Based Pricing Strategies
Join today to access over 22,600 courses taught by industry experts or purchase this course individually.
Cost-plus contracts: Examples of government contracts
From the course: Accounting Foundations: Cost-Based Pricing Strategies
Cost-plus contracts: Examples of government contracts
- A cost-plus contract is one in which the buyer agrees to reimburse all the costs of the seller plus an additional markup amount to provide the seller with a profit. Cost-plus contracts are very common when private companies agree to provide a good or service to a government. For example, Boeing disclosed that in 2018 about 30% of its contracts were cost-plus contracts. Many of these cost-plus contracts are for space systems and involve unique, complex, never-before-seen products. Boeing wrote the following in its financial statements. "Our BDS, Boeing Defense, Space and Security business "includes a variety of development programs "which have complex design and technical challenges. "Many of these programs "have cost-type contracting arrangements." As you can imagine, historically, there has not been an active market for big budget space delivery systems. In this setting, cost-plus contracts make sense. Now…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.