FAR Cost Accounting Standards (CAS) 3

Question 1

Which contract type is EXEMPT from CAS coverage based on the nature of the award process?

Accepted Answer

Contracts set aside for small businesses

Answer

Cost-plus-fixed-fee contracts over $2 million

Answer

Time-and-materials contracts for professional services

Answer

Letter contracts later definitized above $2 million

Question 2

The 'cost impact' of a CAS noncompliance or accounting change is best described as:

Accepted Answer

The net effect on all affected CAS-covered contracts due to the change or noncompliance

Answer

The variance between estimated and actual costs on a single contract

Answer

The increased profit margin resulting from the accounting change

Answer

The direct cost difference from the original contract baseline estimate

Question 3

When a contractor fails to comply with an applicable CAS requirement, what is the government's primary remedy?

Accepted Answer

Recovery of increased costs resulting from the noncompliance, plus interest

Answer

Immediate contract termination for default

Answer

Suspension of the contractor from receiving new awards

Answer

A penalty equal to twice the amount of the noncompliant cost

Question 4

A contractor must file a Disclosure Statement when net CAS-covered award value in the most recent cost accounting period exceeds:

Accepted Answer

$50 million

Answer

$2 million

Answer

$10 million

Answer

$25 million

Question 5

Under CAS 410, what costs must be accumulated in the General and Administrative (G&A) expense pool?

Accepted Answer

Management, financial, and administrative costs that benefit the entire business unit

Answer

Direct material and direct labor costs supporting specific contracts

Answer

Selling expenses and independent research and development costs only

Answer

Executive compensation and board of directors fees exclusively

Question 6

What does 'adequate price competition' mean as a CAS exemption criterion?

Accepted Answer

Price set by competition sufficient to establish reasonableness without further analysis

Answer

Sealed bidding with more than 10 responsive offerors on record

Answer

Competition judged adequate by the contracting officer based on market research

Answer

Any competitive negotiated acquisition regardless of number of offerors

Question 7

In the context of CAS compliance reviews, 'materiality' refers to:

Accepted Answer

The significance of an accounting practice change or noncompliance based on its cost impact

Answer

The physical presence and condition of tangible assets on a contract

Answer

The requirement to use Generally Accepted Accounting Principles (GAAP) for all entries

Answer

The minimum direct material dollar threshold requiring separate cost tracking