Cost Accounting Standards (CAS) Flashcards

Under the Cost Accounting Standards (CAS), 'modified CAS coverage' applies to a negotiated contract or subcontract when the award value is:

Answer: At least $2 million but less than $50 million

Modified CAS coverage applies to contracts/subcontracts with a value of at least $2 million but less than $50 million (unless full coverage applies due to the contractor's prior-year CAS-covered awards). Modified coverage requires compliance with CAS 401, 402, 405, and 406 only.

Which of the following contractors is EXEMPT from Cost Accounting Standards (CAS) requirements?

Answer: A small business concern as defined under the Small Business Act

Small business concerns are explicitly exempt from CAS requirements under 48 CFR 9903.201-1. This exemption recognizes that the administrative burden of CAS compliance would be disproportionate for small businesses. Other exemptions include contracts below the CAS threshold and firm-fixed-price contracts awarded based on adequate price competition.

A contractor is required to file a CAS Disclosure Statement (CASB DS-1) when it receives a CAS-covered award and:

Answer: The award is $50 million or more, or it received $50 million or more in net CAS-covered awards in the prior cost accounting period

A Disclosure Statement is required when a contractor receives a single CAS-covered award of $50 million or more, or when it received $50 million or more in net CAS-covered awards during the immediately preceding cost accounting period. The Disclosure Statement documents the contractor's cost accounting practices.

When a contractor makes a voluntary change in its cost accounting practice on a CAS-covered contract, what is the contractor required to submit to the government?

Answer: A cost impact proposal showing the estimated increase or decrease in cost to the government

Under CAS 9903.202-3, when a contractor makes a change in cost accounting practice, it must submit a cost impact proposal to the contracting officer. This proposal shows the estimated increase or decrease in costs for each affected CAS-covered contract. If the change increases costs, the government may require the contractor to absorb them; if it decreases costs, the government benefits.

CAS Standard 418 (Allocation of Direct and Indirect Costs) primarily addresses which accounting issue?

Answer: The proper classification and allocation of costs as either direct or indirect, and the consistent application of those classifications

CAS 418 requires that costs identified specifically with a contract be charged directly to that contract, while costs that benefit multiple contracts must be allocated as indirect costs. The standard ensures consistency in how costs are classified across periods and contracts, preventing contractors from shifting costs between direct and indirect pools to maximize reimbursement.

The primary objective of the Cost Accounting Standards (CAS) is to:

Answer: Achieve uniformity and consistency in cost accounting practices so the government can better measure, assign, and allocate costs on negotiated contracts

CAS was established to achieve consistency and comparability in cost accounting practices so the government can effectively evaluate proposed costs, determine allowable costs, and compare contractor accounting practices over time and across contractors. It does not dictate profit, eliminate audits, or reduce costs per se.