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dustrial practice, a program for the utiliza resulting from winful misconduot, or lack tlon, maintenance, repair, protection, and of good faith on the part of such directors. preservation of Government property so as officers, or other representatives mentioned to assure its full avallability and usefulness In subparagraph (1), above, if the Contracfor the performance of this contract. The tor is notified by the Contracting Oficer Contractor shall take all reasonable steps by registered or certified mall addressed to to comply with all appropriate directions or one of such directors, officers, or other repInstructions which the Contracting Officer resentatives, of the Government's disapmay prescribe as reasonably necessary for the proval, withdrawal of approval, or nonacprotection of Government property.

ceptance of the Contractor's program or sys(g) (1) The Contractor shall not be liable tem. In such event it shall be presumed for any loss of or damage to the Government that any loss or damage to Government propproperty, or for expenses incidental to such erty resulted from such failure. The Conloss or damage, except that the Contractor tractor shall be liable for such loss or damshall be responsible for any such loss or age unless he can establish by clear and damage (including expenses incidental convincing evidence that such loss or damthereto):

age did not result from his fallure to main(1) Which results from willful misconduct tain an approved program or system, or or lack of good faith on the part of any one occurred during such time as an approved of the Contractor's directors or officers, or program or system for control of Governon the part of any of his managers, super ment property was maintained. Intendents, or other equivalent representa If more than one of the above exceptions tives, who has supervision or direction of:

shall be applicable in any case, the Contrac(A) All or substantially all of the Con

tor's liability under any one exception shall tractor's business; or

not be limited by any other exception. If (B) All or substantially all of the Con

the Contractor transfers Government proptractor's operations at any one plant or erty to the possession and control of a separate location in which this contract is

subcontractor, the transfer shall not affect being performed; or

the liability of the Contractor for loss or (C) A separate and complete major in

destruction of or damage to the property dustrial operation in connection with the

as set forth above. However, the Contractor performance of this contract.

shall require the subcontractor to assume (11) Which results from a failure on the

the risk of, and be responsible for, any loss part of the Contractor, due to the willful

or destruction of or damage to the property misconduct or lack of good faith on the

while in the latter's possession or control, part of any of his directors, officers, or other

except to the extent that the subcontract, representatives mentioned in subparagraph

with the prior approval of the Contracting (1), above:

Officer, provides for the relief of the sub(A) To maintain and administer, in ac contractor from such llability. In the abcordance with sound industrial practice, the

sence of such approval, the subcontract shall program for utilization, maintenance, repair,

contain appropriate provisions requiring the protection, and preservation of Government

return of all Government property in as property as required by paragraph (1) hereof,

good condition as when received, except for or to take all reasonable steps to comply

reasonable wear and tear or for the utilizawith any appropriate written direction of the Contracting Officer under paragraph (1)

tion of the property in accordance with the hereof; or

provisions of the prime contract.

(2) The Contractor shall not be reim(B) To establish, maintain, and admin

bursed for, and shall not include as an Item ister in accordance with paragraph (d)

of overhead, the cost of insurance, or any hereof a system for control of Government

provisions for a reserve, covering the risk of property.

loss of or damage to the Government prop(111) For which the Contractor is other

erty, except to the extent that the Governwise responsible under the express terms of

ment may have required the Contractor to the clause or clauses designated in the carry such insurance under any other proSchedule;

visions of this contract. (iv) Which results from a risk expressly

(3) Upon the happening of loss or destrucrequired to be insured under this contract,

tion of or damage to the Government propbut only to the extent of the insurance so

erty, the Contractor shall notify the required to be procured and maintained,

Contracting Officer thereof, and shall comor to the extent of insurance actually procured and maintained, whichever is greater;

municate with the loss and salvage organior

zation, 16 any, now or hereafter designated by (v) Which results from a risk which is in

the Contracting Officer, and with the assistfact covered by Insurance or for which the

ance of the loss and salvage organizations so Contractor is otherwise reimbursed, but only

designated (unless the Contracting Officer to the extent of such insurance or reimburse has designated that no such organization ment.

be employed), shall take all reasonable steps Any fallure of the Contractor to act, as to protect the Government property from provided in subparagraph (11), above, shall further damage, separate the damaged and be conclusively presumed to be a failure undamaged Government property, put all

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(6) Moving Average Cost. An Inventory costing method under which an average unit cost is computed after each acquisition by adding the cost of the newly acquired units to the cost of the units of Inventory on hand and dividing this figure by the new total number of units.

(7) Weighted Average Cost. An inventory costing method under which an average unit cost is computed periodically by dividing the sum of the cost of beginning inventory plus the cost of acquisitions, by the total number of units Included in these two categories.

(b) The following modifications of definitons set forth in Part 400 of this chapter are applicable to this Standard: None.

(3) The w
(4) The st
(5) The la

(c) The n
any invento:
suant to ti
shall be cons

(d) Where ventory over terial of the estimated to total cost in

the cost of s
be establishe
period by red
correspondin
$ 411.60 Illu

(a) Contra
requires two

1.70 Exemptions. 1.80 Effective date. AUTHORITY: 84 Stat. 796, sec. 103 (50 U.S.C. pp. 2168). SOURCE: The provisions of Part 411 appear

40 FR 19425, May 5, 1975, unless other. se noted. 11.10 General applicability. General applicability of this Cost Accountg Standard is established by $ 331.30 of the pard's regulations on applicability, exempon, and waiver of the requirement to in. ide the Cost Accounting Standards conact clause in negotiated defense prime ntracts and subcontracts (8 331.30 of this Lapter). 111.20 Purpose. (a) The purpose of this Cost Accounting andard is to provide criteria for the acunting for acquisition costs of material. ne Standard includes provisions on the use

inventory costing methods. Consistent apIcation of this Standard will improve the easurement and assignment of costs to cost jectives. (b) This Cost Accounting Standard does t cover accounting for the acquisition sts of tangible capital assets nor accountAlity for Government-furnished materials. 11.30 Definitions. (a) The following definitions of terms aich are prominent in this Standard are Orinted from Part 400 of this chapter for nvenience. Other terms which are used in Is Standard and are defined in Part 400 of is chapter have the meanings ascribed to em in that part unless the text demands & Terent definition or the definition is modid in paragraph (b) of this section: (1) Allocate. To assign an item of cost, or group of items of cost, to one or more cost jectives. This term includes both direct as-nment of cost and the reassignment of a are from an indirect cost pool. (2) Business Unit. Any segment of an orgaeation or an entire business organization nich is not divided into segments. (3) Category of Material. A particular kind

goods, comprised of identical or Interangeable units, acquired or produced by & tractor, which are intended to be sold, or nsumed or used in the performance of her direct or indirect functions. (4) Cost Objective. A function, organizanal subdivision, contract or other work it for which cost data are desired and for ich provision is made to accumulate and easure the cost of processes, products, jobs, pitalized projects, etc. (5) Material Inventory Record. Any record ed for the accumulation of actual or standE costs of a category of material recorded an asset for subsequent cost allocation to e or more cost objectives.

[411.40 Fundamental requirement.
(6) The contractor shall have, and consist-
ently apply, written statements of account-

airborne car
lng pollcies and practices for accumulating

lished policy
the costs of material and for allocating costs
of material to cost objectives

specifically lo

need arises ar
(b) The cost of units of a category of ma-

contract. Anc
terial may be allocated directly to a cost ob-
jectlve provided the cost objective was specif requires thre
Ically identified at the time of purchase or

the contracto
production of the units.

differs from
(c) The cost of material which (1) 1s used cameras orde
solely in performing Indirect functions, or

were placed,
(2) is not a significant element of produc-

specific contra tion cost, whether or not incorporated in an

purchased we end product, may be allocated to an indirect

cameras are 10
cost pool. When significant, the cost of such

camera is che
Indirect material not consumed in a cost ac-
counting perlod shall be established as an

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It was acquir terlal Invento

not be & viol esset at the end of the perlod.

(b)(1) A (d) Except as provided in paragraphs (b)

use of electron and (C) of this section, the cost of a cate

contractor exi gury of material shall be accounted for in

requiring the material Inventory records.

In accordance (e) In allocating to cost objectives the

contractor est costs of a category of material issued from

record for elec company-owned material inventory, the

the cost of ur
costing method used shall be selected in ac-

ernment cont.
cordance with the provisions of $ 411.50, and
shall be used in a manner which results in a practice we
systematic and rational costing of issues of

ments of this
material to cost objectives. The same costing

(2) The c method shall, within the same business unit,

additional coi be used for similar categories of materials.

tronic tube v

is similar tot 1 411.50 Techniques for application.

(b)(1) of this () Material cost shall be the acquisition

as "Y." At the cost of a category of material whether or not

tubes is writte a material inventory record is used. The pur

tify the specif chase price of material shall be adjusted by

on each cont extra charges incurred or discounts and

tractor establ credits earned. Such adjustments shall be

these tubes ai

contracts on
charged or credited to the same cost objec-

cause a FIFO
Hive as the purchase price of the material,
except that where it is not practical to do so,

category of m
the contractor's policy may provide for the

ness unit, the onsistent Inclusion of such charges or

for "Y" would tredits in an appropriate indirect cest pool.

(c) A contr b) One of the following inventory costing

Accounting Sti methods shall be used when issuing material

407 of this che from a company-owned Inventory:

cost method fc (1) The first-In, first-out (FIFO) method, tlally all categ 14] The moving average cost method, contractor's e

269

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(6) Moving Average Cost. An inventory costing method under which an average unit cost is computed after each acquisition by adding the cost of the newly acquired units to the cost of the units of Inventory on hand and dividing this figure by the new total number of units.

(7) Weighted Average Cost. An inventory costing method under which an average unit cost is computed periodically by dividing the sum of the cost of beginning inventory plus the cost of acquisitions, by the total number of units included in these two categories.

(b) The following modifications of definitions set forth in Part 400 of this chapter are applicable to this Standard: None. $ 411.40 Fundamental requirement. (a) The contractor shall have, and consistently apply, written statements of accounting policies and practices for accumulating the costs of material and for allocating costs of material to cost objectives

(b) The cost of units of a category of material may be allocated directly to a cost objective provided the cost objective was specifically identified at the time of purchase or production of the units.

(c) The cost of material which (1) is used solely in performing Indirect functions, or (2) is not a significant element of production cost, whether or not incorporated in an end product, may be allocated to an indirect cost pool. When significant, the cost of such indirect material not consumed in a cost accounting period shall be established as an asset at the end of the period.

(d) Except as provided in paragraphs (b) and (c) of this section, the cost of a category of material shall be accounted for in material Inventory records.

(e) In allocating to cost objectives the costs of a category of material issued from company-owned material inventory, the costing method used shall be selected in accordance with the provisions of $ 411.50, and shall be used in a manner which results in systematic and rational costing of issues of material to cost objectives. The same costing method shall, within the same business unit, be used for similar categories of materials. $ 411.50 Techniques for application.

(a) Material cost shall be the acquisition cost of a category of material whether or not a material inventory record is used. The purchase price of material shall be adjusted by extra charges incurred or discounts and credits earned. Such adjustments shall be charged or credited to the same cost objective as the purchase price of the material, except that where it is not practical to do so, the contractor's policy may provide for the consistent inclusion of such charges or credits in an appropriate indirect cost pool.

(b) One of the following inventory costing methods shall be used when issuing material from a company-owned Inventory:

(1) The first-in, first-out (FIFO) method, (2) The moving average cost method,

(3) The weighted average cost method, (4) The standard cost method, or (5) The last-in, first-out (LIFO) method.

(c) The method of computation used for any inventory costing method selected pursuant to the provisions of this Standard shall be consistently followed.

(d) Where the excess of the ending inventory over the beginning inventory of material of the type described in $ 411.40(c) is estimated to be significant in relation to the total cost included in the Indirect cost pool, the cost of such unconsumed material shall be established as an asset at the end of the period by reducing the indirect cost pool by a corresponding amount. § 411.60 Illustrations

(a) Contractor "A" has one contract which requires two custom-ordered, high-value, airborne cameras. The contractor's established policy is to order such special items specifically identified to a contract as the need arises and to charge them directly to the contract. Another contract is recelved which requires three more of these cameras, which the contractor purchases at a unit cost which differs from the unit cost of the first two cameras ordered. When the purchase orders were placed, the contractor identified the specific contracts on which the cameras being purchased were to be used. Although these cameras are identical, the actual cost of each camera is charged to the contract for which it was acquired without establishing a material inventory record. This practice would not be a violation of this Standard.

(b) (1) A Government contract requires use of electronic tubes identified as "W." The contractor expects to receive other contracts requiring the use of tubes of the same type. In accordance with its written policy, the contractor establishes a material inventory record for electronic tube "W," and allocates the cost of units issued to the existing Government contract by the FIFO method. Such a practice would conform to the requirements of this Standard.

(2) The contractor is awarded several additional contracts which require an electronic tube which the contractor conludes is similar to the one described in paragraph (b) (1) of this section and which is identified as "Y." At the time a purchase order for these tubes is written, the contractor cannot identify the specific number of tubes to be used on each contract. Consequently, the contractor establishes an inventory record for these tubes and allocates their cost to the contracts on an average cost method. Because a FIFO method is used for a similar category of material within the same business unit, the use of an average cost method for "Y" would be a violation of this Standard.

(c) A contractor complies with the Cost Accounting Standard on standard costs (Part 407 of this chapter), and he uses a standard cost method for allocating the costs of essentially all categories of material. Also, it is the contractor's established practice to charge

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(6) Moving Average Cost. An Inventory costing method under which an average unit cost is computed after each acquisition by adding the cost of the newly acquired units to the cost of the units of Inventory on hand and dividing this figure by the new total number of units.

(7) Weighted Average Cost. An Inventory
costing method under which an average unit
cost is computed periodically by dividing the
sum of the cost of beginning inventory plus
the cost of acquisitions, by the total number
of units included in these two categories.

(b) The following modifications of defini-
tlons set forth in Part 400 of this chapter are
applicable to this Standard: None.
| 411.40 Fundamental requirement.
(6) The contractor shall have, and consist-
ently apply, written statements of account-
ing policies and practices for accumulating
the costs of material and for allocating costs
of material to cost objectives

(b) The cost of units of a category of ma-
terlal may be allocated directly to a cost ob-
Jective provided the cost objective was specif-
cally identified at the time of purchase or
production of the units.

(c) The cost of material which (1) is used solely in performing indirect functions, or (2) is not a significant element of produc

(3) The a
(4) The s
(5) The 1

(c) The r
any invento
suant to ti
shall be cons

(d) Where
ventory over
terial of the
estimated to
total cost in
the cost of s
be establishe
period by red
correspondin
$ 411.60 Illu

(a) Contra
requires two
airborne car

c.
1.70 Exemptions.
1.80 Effective date.
AUTHORITY: 84 Stat. 796, sec. 103 (50 U.S.C.
P. 2168).
SOURCE: The provisions of Part 411 appear

40 FR 19425, May 5, 1975, unless other.
se noted.
11.10 General applicability.
General applicability of this Cost Account-
g Standard is established by $ 331.30 of the
ward's regulations on applicability, exemp-
on, and waiver of the requirement to in.
ade the Cost Accounting Standards con-
act clause in negotiated defense prime
ntracts and subcontracts ($ 331.30 of this
apter).
11.20 Purpose.
(a) The purpose of this Cost Accounting
andard is to provide criteria for the ac-
unting for acquisition costs of material.
e Standard includes provisions on the use
Inventory costing methods. Consistent ap-
-cation of this Standard will improve the
easurement and assignment of costs to cost
jectives.
(b) This Cost Accounting Standard does
t cover accounting for the acquisition
sts of tangible capital assets nor account-
ality for Government-furnished materials.
11.30 Definitions.
(a) The following definitions of terms
aich are prominent in this Standard are
printed from Part 400 of this chapter for
venience. Other terms which are used in
Is Standard and are defined in Part 400 of
is chapter have the meanings ascribed to
em in that part unless the text demands &
Terent definition or the definition is modi.
d in paragraph (b) of this section:
(1) Allocate. To assign an item of cost, or
group of items of cost, to one or more cost
jectives. This term includes both direct as-
nment of cost and the reassignment of a
are from an indirect cost pool.
2) Business Unit. Any segment of an orge.
cation or an entire business organization
cich is not divided into segments.
3) Category of Material. A particular kind

goods, comprised of identical or interangeable units, acquired or produced by a atractor, which are intended to be sold, of asumed or used in the performance of her direct or indirect functions. 4) Cost Objective. A function, organizanal subdivision, contract or other work At for which cost data are desired and for Lich provision is made to accumulate and -asure the cost of processes, products, jobs, italized projects, etc.

5) Material Inventory Record. Any record ed for the accumulation of actual or stand

costs of a category of material recorded an asset for subsequent cost allocation to e or more cost objectives.

[graphic]

lished policy specifically 10 need arises ar contract. Anc requires thre the contracto differs from cameras orde were placed,

specific contra tion cost, whether or not incorporated in an

purchased we

cameras are le
end product, may be allocated to an indirect

camera is cha
cost pool. When significant, the cost of such
Indirect material not consumed in a cost ac-

It was acquir
counting perlod shall be established as an

terlal Invento asset at the end of the period.

not be a viol (d) Except as provided in paragraphs (b)

(b) (1) AC and (c) of this section, the cost of a cate

use of electror gory of material shall be accounted for in

contractor exp material Inventory records.

requiring the (6) In allocating to cost objectives the

In accordance costs of a category of material issued from

contractor est company-owned material inventory, the

record for elec costing method used shall be selected in ac

the cost of un cordance with the provisions of $ 411.50, and

ernment contr shall be used in a manner which results in

a practice wc systematic and rational costing of issues of

ments of this material to cost objectives. The same costing

(2) The co method shall, within the same business unit,

additional cor be used for similar categories of materials.

tronic tube w | 411.50 Techniques for application.

is similar to ti

(b)(1) of this
() Material cost shall be the acquisition

as “Y." At the
cost of a category of material whether or not
å taaterial inventory record is used. The pur-

tubes is writte
chase price of material shall be adjusted by

tify the specifi
extra charges incurred or discounts and

on each conti
tractor establi
these tubes ar
contracts on
cause a FIFO
category of me
ness unit, the
for "Y" would be

(c) A contre
Accounting Sta
407 of this cha
cost method for
tially all catego
contractor's es

credits earned. Such adjustments shall be
charged or credited to the same cost objec-
tive as the purchase price of the material,
except that where it is not practical to do so,
the contractor's policy may provide for the
consistent Inclusion of such charges or
credits in an appropriate indirect cost pool.
6) One of the following inventory costing
methods shall be used when issuing material
from a company-owned Inventory:
!) The first-in, first-out (FIFO) method,
(3) The moving average cost method,

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(6) Moving Average Cost. An Inventory costing method under which an average unit cost is computed after each acquisition by adding the cost of the newly acquired units to the cost of the units of Inventory on hand and dividing this figure by the new total number of units.

(7) Weighted Average Cost. An inventory costing method under which an average unit cost is computed periodically by dividing the sum of the cost of beginning Inventory plus the cost of acquisitions, by the total number of units included in these two categories.

(b) The following modifications of definitions set forth in Part 400 of this chapter are applicable to this Standard: None. § 411.40 Fundamental requirement. (a) The contractor shall have, and consistently apply, written statements of accounting policies and practices for accumulating the costs of material and for allocating costs of material to cost objectives

(b) The cost of units of a category of material may be allocated directly to a cost objective provided the cost objective was specifIcally identified at the time of purchase or production of the units.

(C) The cost of material which (1) is used solely in performing indirect functions, or (2) is not a significant element of production cost, whether or not incorporated in an end product, may be allocated to an indirect cost pool. When significant, the cost of such indirect material not consumed in a cost accounting period shall be established as an asset at the end of the period.

(d) Except as provided in paragraphs (b) and (c) of this section, the cost of a category of material shall be accounted for in material inventory records.

(e) In allocating to cost objectives the costs of a category of material issued from company-owned material inventory, the costing method used shall be selected in accordance with the provisions of § 411.50, and shall be used in a manner which results in systematic and rational costing of issues of material to cost objectives. The same costing method shall, within the same business unit, be used for similar categories of materials. $ 411.50 Techniques for application.

(a) Material cost shall be the acquisition cost of a category of material whether or not & material inventory record is used. The purchase price of material shall be adjusted by extra charges incurred or discounts and credits earned. Such adjustments shall be charged or credited to the same cost objective as the purchase price of the material, except that where it is not practical to do so, the contractor's policy may provide for the consistent inclusion of such charges or credits in an appropriate indirect cost pool.

(b) One of the following Inventory costing methods shall be used when issuing material from a company-owned Inventory:

(1) The first-in, first-out (FIFO) method, (2) The moving average cost method,

(3) The weighted average cost method, (4) The standard cost method, or (5) The last-in, first-out (LIFO) method.

(c) The method of computation used for any inventory costing method selected pursuant to the provisions of this Standard shall be consistently followed.

(d) Where the excess of the ending Inventory over the beginning inventory of material of the type described in § 411.40(c) is estimated to be significant in relation to the total cost included in the indirect cost pool, the cost of such unconsumed material shall be established as an asset at the end of the period by reducing the Indirect cost pool by a corresponding amount. $ 411.60 Illustrations

(a) Contractor "A" has one contract which requires two custom-ordered, high-value, airborne cameras. The contractor's established policy is to order such special items specifically identified to a contract as the need arises and to charge them directly to the contract. Another contract is received which requires three more of these cameras, which the contractor purchases at a unit cost which differs from the unit cost of the first two cameras ordered. When the purchase orders were placed, the contractor identified the specific contracts on which the cameras being purchased were to be used. Although these cameras are identical, the actual cost of each camera is charged to the contract for which It was acquired without establishing a material inventory record. This practice would not be a violation of this Standard.

(b) (1) A Government contract requires use of electronic tubes identified as "W." The contractor expects to receive other contracts requiring the use of tubes of the same type. In accordance with its written policy, the contractor establishes a material inventory record for electronic tube "W," and allocates the cost of units issued to the existing Government contract by the FIFO method. Such a practice would conform to the requirements of this Standard,

(2) The contractor is awarded several additional contracts which require an electronic tube which the contractor conludes is similar to the one described in paragraph (b) (1) of this section and which is identified as “Y." At the time a purchase order for these tubes is written, the contractor cannot identify the specific number of tubes to be used on each contract. Consequently, the contractor establishes an inventory record for these tubes and allocates their cost to the contracts on an average cost method. Because a FIFO method is used for a similar category of material within the same business unit, the use of an average cost method for "Y" would be a violation of this Standard.

(c) A contractor complies with the Cost Accounting Standard on standard costs (Part 407 of this chapter), and he uses a standard cost method for allocating the costs of essentially all categories of material. Also, it is the contractor's established practice to charge

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