Explanation:

Cost-plus contracts provide for the payment by the contractee of the actual cost of the contract plus a stipulated or agreed profit. Thus under cost-plus contract the contract price is determined by adding to the actual cost of direct material, direct labour and direct expenses, a certain amount to cover the overhead costs of the contractor and an agreed profit.

Cost plus contracts are based on Absorption Costing technique in which total allocation of costs will be taken into consideration.