Cost-Plus Contract
 |
Definition of 'Cost-Plus Contract'An agreement to pay a company for a job based on the amount of money used to buy the materials required to complete that job plus an added payment. A cost-plus contract fully reimburses a contractor for the cost of materials and then adds additional money to arrive at the total cost of the job. Cost-plus contracts are commonly used in research and development activities, where it is difficult to determine in advance how much a job should cost. For example, the |
 |
Investopedia explains 'Cost-Plus Contract'Cost overruns are a major concern with cost-plus contracts, since all costs are reimbursed and the additional fee may already be known in advance. However, this problem can be mitigated or avoided if the contract is structured properly. For example, the contract can offer an incentive fee for saving money on materials, or the contract can limit the amount of money that can be spent on materials. |
Related Definitions
Articles Of Interest
-
Tax Withholding: Good For Government, Bad For Taxpayers
It's important to understand where that money coming out of your paycheck goes and why - after all, you earned it. -
Is The U.S. Government Too Big To Fail?
Some think that the U.S. government is too big to fail, but one must only look at historical examples to know that it's not true. -
Top 6 U.S. Government Financial Bailouts
U.S. bailouts date all the way back to 1792. Learn how the biggest ones affected the economy. -
Tax-Free Accounts Make Saving A Snap For Canadians
In 2009, the Canadian government began allowing citizens to save more tax-free dollars than ever. -
Navigating Government And Nonprofit Financial Statements
Learn how to trace where your tax dollars and charitable donations are going. -
Depreciation: Straight-Line Vs. Double-Declining Methods
Appreciate the different methods used to describe how book value is "used up". -
Financial Statement: Extraordinary Vs. Nonrecurring Items
When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ... -
Get A Career In Showbiz Accounting
An accounting career doesn't have to be boring. If you love numbers, but want excitement as well, consider the field of showbiz accounting. -
What Management Accountants Do
If you like keeping track of a company's income and expenses but also want to hold a position with significant responsibility and authority, management accounting could be the job for you. -
GAAP And The IFRS Standards Convergence Efforts In 3 Substantial Areas
Understand the specific steps that have been taken in hopes of converging the GAAP and the IFRS accounting standards, despite the philosophically and culturally based methodological differences ...
Free Annual Reports
