An ethical issue arises when costs are allocated to products or services that are produced for...
An ethical issue arises when costs are allocated to products or services that are produced for both a competitive market and a public or governmental entity. The latter often purchases on a cost-plus basis creating an incentive to shift costs from the competitive products to cost-plus-based products and contracts.
Can you think of other examples of ethical issues related to cost allocations?
Homework Answers
Ethical issues related to cost allocations -
1. Contractor may try to exaggerate the cost of one or more items to get more percentage of the profit.
2. Same cost may be included two times to the product, one as direct and second time as indirect.
3. Contractor or seller may try to get the reimbursement of certain expenses which are not allowed to reimbursed.
4. Cost may not be sometimes in sync with the industry basis, due to any reason, resulting in variation.
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