This Standard is effective as of April 17, 1992. Contractors with prior CAS-covered contracts with full coverage shall continue this Standard's applicability upon receipt of a contract to which this Standard is applicable. For contractors with no previous contracts subject to this Standard, this Standard shall be applied beginning with the contractor's next full fiscal year beginning after the receipt of a contract to which this Standard is applicable.
Appendix A to 9904.410-Transition From a Cost of Sales or Sales Base to a Cost Input Base
A business unit may use the method described below for transition from the use of a cost of sales or sales base to a cost input base.
The following illustrates how a business unit would use this transition method.
If Business Unit R chooses to use the transition method provided in 9904.410-50(e), it will allocate the G&A expense pool to these contracts as follows:
Having chosen to use 9904.410-50(e), Business Unit R will use the transition method of allocating the G&A expense pool to final cost objectives until all contracts awarded prior to January 1, 1978, are completed (1979 if the contracts are completed on schedule). Beginning with the cost accounting period subsequent to that time, 1980, Unit R will use a cost input base to allocate the G&A expense pool to all cost objectives. Unit R will also carry forward an inventory suspense account in accordance with the requirements of this Standard.
During the years 1978, 1979, 1980, Business Unit N reported the following data:
Contracts prior to Jan. 1, 1978 | Contracts prior to Jan. 1, 1978 | ||||||
Total | Non-CAS work | CAS-fixed price work | CAS-cost contract | Non-CAS work | CAS-fixed price work | CAS-cost contracts | |
Year 1978: | |||||||
Beginning inventory | $500 | 300 | 200 | 0 | 0 | 0 | 0 |
Cost input | + 3000 | 400 | 600 | 700 | 500 | 500 | 300 |
Total | 3500 | 700 | 800 | 700 | 500 | 500 | 300 |
Cost of sales | -3000 | 600 | 550 | 700 | 450 | 400 | 300 |
Ending inventory | 500 | 100 | 250 | 0 | 50 | 100 | 0 |
Year 1979: | |||||||
Beginning inventory | 500 | 100 | 250 | 0 | 50 | 100 | 0 |
Cost input | + 3000 | 400 | 600 | 700 | 500 | 500 | 300 |
Total | 3500 | 500 | 850 | 700 | 550 | 600 | 300 |
Cost of sales | -2500 | 450 | 650 | 700 | 150 | 250 | 300 |
Ending inventory | 1000 | 50 | 200 | 0 | 400 | 350 | 0 |
Year 1980: | |||||||
Beginning inventory | 1000 | 50 | 200 | 0 | 400 | 350 | 0 |
Cost input | + 3000 | 400 | 600 | 700 | 500 | 500 | 300 |
Total | 4000 | 450 | 800 | 700 | 900 | 850 | 300 |
Cost of sales | -3250 | 450 | 800 | 700 | 450 | 550 | 300 |
Ending inventory | 750 | 0 | 0 | 0 | 450 | 300 | 0 |
Notes:
Operating data is in thousands of dollars.
G. & A. expense $375,000 in accordance with the requirements of this standard.
Work existing prior to January 1, 1978, may include-
Production under standing or unlimited work orders, continuous flow processes and the like, not identified with contracts or customer orders are to be treated as final cost objectives awarded after the date on which a business unit must first allocate its costs in compliance with the requirements of this Standard.
Business Unit N may allocate the G&A expense pool as follows:
[In dollars]
Year 1978 | Year 1979 | Year 1980 | |
1. G.&A. expense pool | 375 | 375 | 375 |
Cost of sales rate | 375/3,000 = .125 | 375/2,500 = .150 | 375/3,250 = .115 |
Cost input | 375/3,000 = .125 | 375/3,000 = .125 | 375/3,000 = .125 |
2. G.&A. allocations: | |||
Prior contracts: | |||
Non-CAS work | 600 * 0.125 = 75.00 | 450 * 0.15 = 67.50 | 450 * 0.115 = 51.75 |
CAS-fixed price work | 550 * 0.125 = 68.75 | 650 * 0.15 = 97.50 | 800 * 0.115 = 92.00 |
CAS-cost contracts | 700 * 0.125 = 87.50 | 700 * 0.15 = 105.00 | 700 * 0.115 = 80.50 |
After contracts: | |||
Non-CAS work | 500 * 0.125 = 62.50 | 500 * 0.125 = 62.50 | 500 * 0.125 = 62.50 |
CAS-fixed price work | 500 * 0.125 = 62.50 | 500 * 0.125 = 62.50 | 500 * 0.125 = 62.50 |
CAS-cost contracts | 300 * 0.125 = 37.50 | 300 * 0.125 = 37.50 | 300 * 0.125 = 37.55 |
393.75 | 432.50 | 386.80 | |
3. Inventory suspense account1 | 200 | ||
G.&A. rate applicable | .125 |
1 Beginning inventory of contracts subject to the CAS clause, January 1978.
Business Unit N would compute its G&A expense allocation rate applicable to contracts subject to the CAS clause as follows:
(1) Amount of inventory suspense account | $200,000 |
Amount of ending inventory | 100,000 |
Difference | 100,000 |
G. & A. rate applicable (see 2.A. above) | * 0.125 |
Adjustment to G. & A. expense applicable to contracts subject to the CAS clause | 12,500 |
(2) G. & A. expense pool | 410,000 |
G. & A. expenses applicable to contracts subject to the CAS clause ($1,500,000/$3,500,000 * $410,000) | 175,890 |
G. & A. expenses applicable to other work | 234,110 |
(3) G. & A. expenses applicable to contracts subject to the CAS clause | 175,890 |
Adjustment to G. & A. expenses applicable to contracts subject to the CAS clause | -12,500 |
G. & A. expenses allocable to contracts subject to the CAS clause | 163,390 |
(4) G. & A. expense allocation rate applicable to contracts subject to the CAS clause for cost accounting period 1982-$163,390/$1,500,000 = 0.109. |
The amount of the inventory suspense account would be reduced to $100,000.
48 C.F.R. §§9904.410-63