Definition: Review and evaluation of cost data for the purpose of arriving at costs actually incurred or estimates of costs to be incurred.

• A. Cost Analysis
• B. Market Oriented Pricing
• C. Strategic Sourcing
• D. Incentive Contracts

Answer: (A)

Cost analysis is the process of reviewing and evaluating cost data to determine what costs have actually been incurred or estimates of costs to be incurred. This focuses on the cost information itself—labor, materials, overhead, and other cost drivers—and uses that data to judge reasonableness, forecast future costs, and support pricing or negotiation decisions. It provides the factual basis for understanding whether proposed costs align with what has been and will be spent.

The other concepts serve different purposes. Market-oriented pricing centers on setting price based on market conditions rather than scrutinizing internal cost data. Strategic sourcing is about the end-to-end process of identifying, evaluating, and selecting suppliers to maximize value across the supply base. Incentive contracts are contract types that tie payments to performance outcomes. While related to procurement, none of these emphasizes the detailed review and evaluation of cost data to arrive at actual or estimated costs as cost analysis does.