Define the following terms and how they impact pricing approaches.
a. Direct Cost –
b. Indirect Cost
c. Allowable Cost
d. Allocable Cost
e. Reasonable Price
f. Fair and Reasonable Price
g. Basis of Estimate
h. Work Breakdown Structure
i. Cost or Pricing Data
j. Market Research
Expert Answer
a. Direct Cost: It is completely attributed to the production of goods and services. Direct costs may be related to labor, materials, fuel or power consumption. It has a direct impact on the pricing approach as it directly traced to specific product.
b. Indirect Cost: They are not directly related to a cost object. It can be fixed or variable. Example-
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