1. Governments often contract with suppliers for unique items (e.g. military equipment) on a cost-plus basis. Cost plus pricing is one where the contractor is reimbursed for the cost of completing the contract plus a mark-up on computed cost.

In a cost-plus contracting environment, what is the contractors motivation when deciding the rate to be used to allocate manufacturing overhead to the job? In other words, would the contractor prefer a higher or lower rate? Why? 4 points