Sec 1, Ch 2 - Cost Accounting

Question 1

What type of accounting do governments use to monitor programs to ensure they are operating efficiently/effectively

Answer 1

Cost accounting

Question 2

What are the two (2) types of costs associated with an objective?

Answer 2

1) Direct

2) Indirect

Question 3

What is a direct cost?

Answer 3

Costs that can be specifically identified with a single output

Question 4

What is an indirect cost?

Answer 4

Costs that are jointly or commonly used for two or more outputs and are not identifiable with a single output.

Question 5

What Standard establishes the need to provide reliable and timely information on the cost of federal programs?

Answer 5

SFFAS 30, amended SFFAS 4 to provide for full implementation of the original standards

Question 6

What are the five (5) requirements outlined in SFFAS 30?

Answer 6

1) Requirement of Cost Accounting on a continual basis
2) Responsibility Segments should be established
3) Full Cost of outputs should be reported
4) Inter-Entity Costs should incorporate the full cost of goods/services it receives from other entities
5) Costing Methodologies should be accumulated based on the type of resource

Question 7

What is a responsibility segment?

Answer 7

A segment responsible for carrying out a mission or conducting a major line of activity.

Question 8

Managerial cost accounting should (as it relates to responsibility segments):

Answer 8

1) Define and accumulate outputs
2) Accumulate costs and quantify units of resources
3) Assign costs to outputs

Question 9

Cost assignments should use the following methods listed in order of preference:

Answer 9

1) Directly tracing costs
2) Assigning costs on a cause-and-effect basis
3) Allocating costs on a reasonable/consistent basis

Question 10

Under what provisions can you find “Uniform Guidance”, the principles to determining allowable costs for Federal Grants?

Answer 10

OMB Circular A-87, Appendix VII

Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards

Question 11

When was “Uniform Guidance” deemed effective?

Answer 11

December 26, 2014

Question 12

What two (2) OMB Circulars cover principles for reimbursing colleges/higher-level institutions?

Answer 12

Circular A-21, Cost Principles for Educational Institutions

Circular A-122, Cost Principles for Non-Profit Orgs.

Question 13

How is an indirect cost ratio determined?

Answer 13

A percentage of total allowable indirect costs to the base selected (e.g. salaries/wages)

Question 14

What are the four (4) types of special indirect cost rates?

Answer 14

1) Provisional rate
2) Final Rate
3) Predetermined Rate
4) Fixed Rate

Question 15

What is a Provisional rate?

Answer 15

A temporary rate to a specified period that is used for funding

Question 16

What is a Final rate?

Answer 16

An indirect cost rate applicable to a specified past period, which is based on the actual allowable costs of the period

Question 17

What is a Predetermined rate?

Answer 17

An indirect cost rate, applicable to a specified current or future period, usually the governments FY, based on estimate of costs

Question 18

What is a Fixed rate?

Answer 18

Similar to a predetermined rate, except the difference between the estimated costs and actual costs is adjusted to the rate computation of a subsequent period

Question 19

What two (2) policys has Uniform Guidance introducted?

Answer 19

1) Allowing to elect to charge a de minimus rate of 10% of a modified total direct cost base
2) Allowing approval of a one-time extension of a federally negotiated predetermined or final rate type up to 4 years.

Question 20

What is an advantage of a User Fee?

Answer 20

Enables all or a portion of the cost of the service to be paid directly by users of the service (i.e. park fees)

Question 21

What should user fees cover at a mimimum?

Answer 21

All direct costs

Question 22

What is the formula for determining a break-even fee?

Answer 22

Unit Price = Fixed Costs + (Volume*Unit Variable Costs)

Divided by Volume