A contract which specifies that the suppler will be paid for the cost of production as well as some fixed amount or percentage of cost as profit is called a(n). approved overrun. cost-plus contract. allocation plan. indirect cost budget. A grouping of various similar costs whose total is allocated using one allocation base is called a cost objective. cost pool. direct cost. sunk cost. A major problem with cost-plus contracts is that they are not acceptable for government contracts. cause the manufacturer to take significant financial risks. require the manufacturer to use variable costing. create an incentive for the manufacturer to allocate as much cost as possible to the goods produced under the cost plus contract. The method of allocation which allocable service department costs to only the production departments and not to other service departments is called the equity method. direct method. reciprocal method. sequential or step method. Which of the follo