CPCM Cost and Price Analysis 2

Question 1

Which profit/fee negotiation objective tool does DCAA use to assess contractor risk and effort when determining a reasonable profit?

Accepted Answer

Weighted Guidelines Method

Answer

The Weighted Guidelines Method (DFARS 215.404-71) assigns weights to factors such as technical risk, contract type risk, and facilities investment to arrive at a structured profit objective.

Question 2

An indirect cost rate is calculated by dividing:

Accepted Answer

Total indirect costs by total direct costs in the base

Answer

An indirect cost rate allocates overhead and G&A costs to contracts by dividing the indirect cost pool by an appropriate allocation base such as direct labor dollars.

Question 3

Under FAR 31.205-6, which type of compensation cost requires a cap when charged to government contracts?

Accepted Answer

Executive compensation above the statutory benchmark

Answer

FAR 31.205-6(p) limits the allowability of senior executive compensation to a benchmark cap published annually, protecting the government from subsidizing excessive executive pay.

Question 4

The forward pricing rate agreement (FPRA) is primarily used to:

Accepted Answer

Establish agreed-upon indirect cost rates for use in pricing future contracts and modifications

Answer

An FPRA is a bilateral agreement between the contractor and the government on future indirect rates, simplifying pricing of new contracts and modifications.

Question 5

Which cost principle governs the allowability of entertainment costs on government contracts?

Accepted Answer

FAR 31.205-14 makes entertainment costs generally unallowable

Answer

FAR 31.205-14 expressly lists entertainment costs — including amusements, diversion, and social activities — as unallowable costs that cannot be charged to government contracts.

CPCM Exam Practice Test

CPCM Exam Practice Test

CPCM Cost and Price Analysis 2