FAR Cost Accounting Standards (CAS) 2

Question 1

Under CAS 403, home office expenses must be allocated to operating segments on the basis of:

Accepted Answer

Beneficial or causal relationship between the expense and segments

Answer

Revenue of each segment only

Answer

Number of employees in each segment

Answer

Direct labor hours recorded in each segment

Question 2

What does CAS 404 govern?

Accepted Answer

Capitalization of tangible capital assets

Answer

Accounting for specifically unallowable costs

Answer

Composition and measurement of pension costs

Answer

Allocation of business unit general and administrative expenses

Question 3

Under CAS 405, what is the required treatment of costs specifically identified as unallowable?

Accepted Answer

They must be identified and excluded from billings, claims, and proposals

Answer

They may be prorated between allowable and unallowable cost pools

Answer

They may be included if they total less than 10% of contract value

Answer

They must be submitted to DCAA for approval before exclusion

Question 4

CAS 406 establishes requirements for which accounting concept?

Accepted Answer

Cost accounting periods used to accumulate and report costs

Answer

Fiscal year selection procedures for government contractors

Answer

Period performance measurement for fixed-price contracts

Answer

Quarterly reporting deadlines for CAS-covered awards

Question 5

Under CAS 409, which depreciation method is NOT permitted for government cost accounting purposes?

Accepted Answer

Accelerated cost recovery system (ACRS/MACRS) tax method

Answer

Straight-line method

Answer

Declining balance method

Answer

Units-of-production method

Question 6

CAS 412 and CAS 413 both address which type of deferred compensation cost?

Accepted Answer

Pension costs for defined benefit and contribution plans

Answer

Stock option and equity compensation plans

Answer

Post-retirement health and welfare benefits

Answer

Severance and termination pay obligations

Question 7

As defined by CAS, what constitutes a 'cost accounting practice'?

Accepted Answer

Any disclosed or established accounting method or technique for measuring or allocating costs

Answer

Any method of estimating costs specifically for a government contract

Answer

The standard chart of accounts maintained for CAS compliance reporting

Answer

The annual review process mandated by the CASB for large contractors