(a) The following examples are illustrative of applications of cost accounting practices which are deemed to be consistent. ------------------------------------------------------------------------
Practices used in accumulating
Practices used in estimating costs for and reporting costs of contract
proposals performance------------------------------------------------------------------------1. Contractor estimates an average 1. Contractor records
direct labor rate for manufacturing manufacturing direct labor
direct labor by labor category or based on actual cost for each
function. individual and collects such
costs by labor category or
function.2. Contract estimates an average cost 2. Contractor records actual
for minor standard hardware items, cost for minor standard
including nuts, bolts, washers, etc. hardware items based upon
invoices or material transfer
slips.3. Contractor uses an estimated rate 3. Contractor accounts for
for manufacturing overhead to be manufacturing overhead by
applied to an estimated direct labor individual items of cost which
base. He identifies the items included are accumulated in a cost pool
in his estimate of manufacturing allocated to final cost
overhead and provides supporting data objectives on a direct labor
for the estimated direct labor base. base.------------------------------------------------------------------------
(b) The following examples are illustrative of application of cost accounting practices which are deemed not to be consistent. ------------------------------------------------------------------------
Practices used in accumulatingPractices used for estimating costs for and reporting costs of contract
proposals performance------------------------------------------------------------------------4. Contractor estimates a total dollar 4. Contractor accounts for
amount for engineering labor which engineering labor by cost
includes disparate and significant function, i.e. drafting,
elements or functions of engineering designing, production,
labor. Contractor does not provide engineering, etc.
supporting data reconciling this
amount to the estimates for the same
engineering labor cost functions for
which he will separately account in
contract performance.5. Contractor estimates engineering 5. Contractor accumulates total
labor by cost function, i.e. drafting, engineering labor in one
production engineering, etc. undifferentiated account.6. Contractor estimates a single dollar 6. Contractor records
amount for machining cost to cover separately the actual costs of
labor, material and overhead. machining labor and material
as direct costs, and factory
overhead as indirect costs.------------------------------------------------------------------------