1604-Contract Cost Principles and Procedures Flashcards

1
Q

What is the definition of allocate?

A

To assign an item of cost, or a group of items of cost, to one or more cost objectives. This term includes both direct assignment of cost and the reassignment of a share from an indirect cost pool

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2
Q

What is the definition of allocable cost?

A

A cost is allocable if it is assignable or chargeable to one
or more cost objectives on the basis of relative benefits
received or other equitable relationship. Subject to the foregoing, a cost is allocable to a Government contract if it—
(a) Is incurred specifically for the contract;
(b) Benefits both the contract and other work, and can be
distributed to them in reasonable proportion to the benefits
received; or
(c) Is necessary to the overall operation of the business,
although a direct relationship to any particular cost objective
cannot be shown.

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3
Q

What is an cost allowable?

A

A cost is allowable only when the cost complies with
all of the following requirements:
(1) Reasonableness.
(2) Allocability.
(3) Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circumstances.
(4) Terms of the contract.
(5) Any limitations set forth in this subpart.

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4
Q

What is the definition of reasonable cost?

A

A cost is reasonable if, in its nature and amount, it does

not exceed that which would be incurred by a prudent person in the conduct of competitive business.

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5
Q

What is the definition of total cost?

A

The total cost, including standard costs properly
adjusted for applicable variances, of a contract is the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred, plus any allocable cost of money pursuant to 31.205-10, less any allocable credits

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6
Q

According to FAR 31.201, can a cost be allocable to a contract, but not allowable?

A

Yes

While the total cost of a contract includes all costs properly allocable to the contract, the allowable costs to the Government are limited to those allocable costs which are allowable pursuant to Part 31 and applicable agency
supplements

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7
Q

What is the definition of allowable cost?

A

A cost is allowable only when the cost complies with
all of the following requirements:
(1) Reasonableness.
(2) Allocability.
(3) Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circumstances.
(4) Terms of the contract.
(5) Any limitations set forth in this subpart.

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8
Q

What do you consider when determining if a cost is reasonable?

A

What is reasonable depends upon a variety of considerations and circumstances, including—
(1) Whether it is the type of cost generally recognized
as ordinary and necessary for the conduct of the contractor’s business or the contract performance;
(2) Generally accepted sound business practices, arm’s length bargaining, and Federal and State laws and regulations;
(3) The contractor’s responsibilities to the Government,
other customers, the owners of the business, employees, and the public at large; and
(4) Any significant deviations from the contractor’s
established practices.

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9
Q

When is a cost allocable?

A

A cost is allocable if it is assignable or chargeable to one
or more cost objectives on the basis of relative benefits
received or other equitable relationship.

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10
Q

Costs may be charged as ______ only or ________only.

A

Direct or Indirect

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11
Q

When may a direct cost be treated as an indirect cost?

A

For reasons of practicality, the contractor may treat any
direct cost of a minor dollar amount as an indirect cost if the accounting treatment—
(1) Is consistently applied to all final cost objectives;
and
(2) Produces substantially the same results as treating
the cost as a direct cost.

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12
Q

What is the definition of Direct Cost?

A

Any cost that is identified specifically with a particular final cost objective

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13
Q

What is the definition of Indirect Cost?

A

Any cost not directly identified with a single final cost objective, but identified with two or more final cost objectives or with at least one intermediate cost objective

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