Check GMAT Club Decision Tracker for the Latest School Decision Releases https://gmatclub.com/AppTrack

 It is currently 26 May 2017, 16:04

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# Historical Costing

Author Message
Senior Manager
Joined: 02 Dec 2007
Posts: 450
Followers: 3

Kudos [?]: 222 [0], given: 6

### Show Tags

07 Sep 2008, 01:51
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 years 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?

A. The government might continue to pay for past inefficient use of funds.

B. The rate of inflation has varied considerably over the past twenty years.

C. The contractual price will be greatly affected by the cost of materials used for the products.

D. Many taxpayers question the amount of money the government spends on military contracts.

E. The pricing method based on historical costing might not encourage the development of innovative weapons.
If you have any questions
New!
Manager
Joined: 21 Aug 2008
Posts: 204
Followers: 1

Kudos [?]: 14 [0], given: 0

### Show Tags

07 Sep 2008, 04:29
Nihit wrote:
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 years 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?

A. The government might continue to pay for past inefficient use of funds.

B. The rate of inflation has varied considerably over the past twenty years.

C. The contractual price will be greatly affected by the cost of materials used for the products.

D. Many taxpayers question the amount of money the government spends on military contracts.

E. The pricing method based on historical costing might not encourage the development of innovative weapons.

Senior Manager
Joined: 06 Apr 2008
Posts: 437
Followers: 1

Kudos [?]: 155 [0], given: 1

### Show Tags

07 Sep 2008, 07:39
Nihit wrote:
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 years 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?

A. The government might continue to pay for past inefficient use of funds.

B. The rate of inflation has varied considerably over the past twenty years.

C. The contractual price will be greatly affected by the cost of materials used for the products.

D. Many taxpayers question the amount of money the government spends on military contracts.

E. The pricing method based on historical costing might not encourage the development of innovative weapons.

IMO A)
SVP
Joined: 17 Jun 2008
Posts: 1553
Followers: 11

Kudos [?]: 264 [0], given: 0

### Show Tags

09 Sep 2008, 12:26
A for me too.
Director
Joined: 20 Sep 2006
Posts: 658
Followers: 3

Kudos [?]: 126 [0], given: 7

### Show Tags

09 Sep 2008, 12:30
IMO A

Because the future price = K * past price, If there is any error made while calculating past price . that error will continue to affect the future price.
Re: Historical Costing   [#permalink] 09 Sep 2008, 12:30
Similar topics Replies Last post
Similar
Topics:
1 Is anyone looking for a private tutor with shared cost in Delhi? 4 25 Aug 2016, 09:52
dirt roads cost 3 01 Dec 2008, 10:18
Display posts from previous: Sort by