Cost and Price Analysis Flashcards

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

Answer: Weighted Guidelines Method

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.

An indirect cost rate is calculated by dividing:

Answer: Total indirect costs by total direct costs in the base

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.

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

Answer: Executive compensation above the statutory benchmark

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.

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

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

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

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

Answer: FAR 31.205-14 makes entertainment costs generally unallowable

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

A Cost Performance Report (CPR) is required on contracts that have an Earned Value Management System (EVMS) because it:

Answer: Provides integrated cost and schedule data to the government for oversight of contract performance

The CPR's five formats give the government monthly visibility into cost/schedule variances, enabling early identification of problems requiring management attention.