The price the government pays for standard weapons purchased from mili

In this question, we are looking for a basis with which to criticize historical costing as being economically sound.

a) This is correct. If the government made a blunder and overpaid one year, then this pricing practice will force the government to continually overpay every year (adding an inflation percentage to an already bloated figure). This is by definition not economically sound.

b) This is why this practice is being utilized, and doesn't make it economically unsound. Wild inflation encourages the use of this practice in order to protect the contractors from inflation. This is the purpose of this practice.

c) The base contractual price can changed based on different materials, but this policy will hold the price of these materials constant + adding inflation. This does not make it economically unsound. Just like ordering more materials will increase the price, so will the cost of those materials.

d) This is very out of scope. We are not discussing whether taxpayers' agree with the money being spent overall

e) Again, out of scope. We are simply focused on whether this one practice is economically sound, not on any other ramifications of it.

I hope this helps!!!

The price the government pays for standard weapons purchased from military contractors is determined by a pricing method called “historical costing.” Historical costing allows contractors to protect their profits by adding a percentage increase, based on the current rate of inflation, to the previous year’s contractual price.

Which of the following statements, if true, is the best basis for a criticism of historical costing as an economically sound pricing method for military contracts?