What does price consist of in this context?

• A. Direct labor costs only
• B. Costs plus any fee or profit applicable to the contract type
• C. Materials costs only
• D. Indirect costs only

Answer: (B)

Price in this context means the total amount the government will pay for contract performance. It is the contractor’s allowable costs incurred to perform the work, plus any fee or profit applicable to the contract type. Direct labor, materials, and indirect costs are all part of allowable costs, but price is not just one category of cost; it combines all allowable costs with the appropriate profit or fee. That’s why the option describing costs plus any fee or profit best captures what price encompasses. The other options focus on only a single cost component and thus don’t reflect the full price.