Cost Classification

Cost Classification and Pricing

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Cost and Price Analysis

Cost Classification and Pricing

Cost Classification

According to Maher, L. (2005), cost classification refers to the separation of different expenses in various categories. The classifications of costs are required for any firm in order to accurately track and account for the allocation of varies types of cost categories. For Hawk-eye, cost classification is crucial since it plays an important part in determining the price of the navigation system. The total overall cost of the navigation systems shares a direct relationship with all indirect and direct cost associated with the end product. For example, the price shall be inclusive of manufacturing, marketing, research and development expenses. Below are the categories of costs for Hawk-eye:

Reasonable cost

Reasonable cost refer to the cost that given its quantity and nature and is comparable with what any other reasonable company will incur provided it is in the same industry and operating under similar circumstances (Thomas, 2012). Hawk-eye’s cost reasonableness would be transparent to the government, and shall not fall outside of what any prudent person would reasonably pay for a similar item.

Allowable cost

Allowable cost, are the cost that are used in connection with contracts and grants that are sponsored by the federal government. Such costs include salaries as well as fringe benefits, supply of materials, capital equipment, and maintenance/service agreements. Hawk-eye will have a Defense Contract Audit Agency (DCAA) approved Cost and Accounting Standard whereby all allowable cost will have a clear audit trail.

Allocable cost

A cost is said to be allocable if the involved goods and services can be assigned to the particular project that is sponsored in line with the benefits that the project receives. For instance, if a cost is fully charged to a project that is...