Allocating General and Administrative Expenses to Government Contracts.

摘要

This study was performed to determine how defense contractors are allocating their general and administrative (G and A) expenses to government contracts. Cost Accounting Standard 410 outlines three acceptable cost input bases that contractors can use to allocate their G and A expenses to government contracts: total cost input, value added, and single element. The contractors should select the base that best represents the total activity of their business unit. This study examines which allocation bases contractors are using today, what their rationale is, when it is appropriate to use each base, and what kind of dollar impact is involved. A review of 367 disclosure statements from 24 of the top defense contractors indicated that 77% of them use total cost input, 18% use value added, and 5% use a single element base such as direct labor. Telephone interviews were made to those contractors who are using value added and single element to determine their rationale for using that particular base. Most of the contractors using value added have a significant percentage of subcontract and material costs or a large amount of customer-furnished components.