Contract disputes regarding cost allocation can be reduced by defining ________.
A) the material items allowed for production
B) the terms used, such as what constitutes direct labor
C) permissible tax deductions
D) minimum profit level the company should earn

Question

Quizplus · Accepted Answer

Defining the terms used, such as what constitutes direct labor, can help prevent disputes over cost allocation. This ensures that both parties have a clear understanding of what costs are included in direct labor, indirect expenses, and other categories of costs. This clarity helps reduce the likelihood of disagreements over the allocation of costs and increases the chances of a successful working relationship. The other choices are not as relevant to reducing contract disputes related to cost allocation.

Contract Disputes Regarding Cost Allocation Can Be Reduced by Defining