{"data":{"id":"us/48-cfr-appendix-b-to-9904.414-part-9904","jurisdiction":"us","citation":"48 CFR Appendix B to 9904.414, Part 9904","heading":"Appendix B to 9904.414—Example—ABC Corporation","body":"ABC Corporation has a home office that controls three operating divisions (Business Units A, B \u0026 C). The home office includes an administrative computer center whose costs are allocated separately to the business units. The separate allocation conforms to the requirements specified in the Cost Accounting Standard No. 403. Tables I through VI deal with home office expense allocations to business units.\nThe A Division is a business unit as defined by the CASB, and it uses one engineering and one manufacturing overhead pool to accumulate costs for charging overhead to final cost objectives. In addition, the indirect cost allocation process also uses two “service centers” with their own indirect cost pools: Occupancy and technical computer center.\nThe costs accumulated in the occupancy pool are allocated among manufacturing overhead, engineering overhead, and the technical computer center on the basis of floor space occupied. The costs accumulated in the technical computer center cost pool are allocated to users on the basis of a CPU hourly rate. Some of these allocations are made to engineering or manufacturing overhead while others are allocated direct to final cost objectives.\nAt the business unit level, all the indirect expense incurred is regarded either as an engineering or manufacturing expense. Thus the sole item that enters into the business unit G\u0026A expense pool is the allocation received by the A Division from the home office.\nOperating results for the A Division are given in Table VII. Facilities capital items for the division are given in Table IX.\nThe example is based on a single set of illustrative contract cost data given in Table VIII. Since two methods, the “regular” and the “alternative” method, are potentially available for computing cost of money on facilities capital items two sets of different results can be considered.\nIn addition, total cost input is used in the example as the allocation base for the G\u0026A expense. Two variations of this example have been prepared to illustrate the impact of excluding or including cost of money from total cost input. Variation I, summarized in Table XIII, excludes cost of money from the cost input allocation base. Variation II, summarized in Tables XVII and XVIII, includes cost of money in the cost input allocation base.\nThroughout the example, where appropriate, cross references have been made to the text of the relevant parts of the Standard.\nVariation I—Total Cost Input Allocation Base Excludes Cost of Money\nTable I—Net Book Value of Home Office Facilities Capital\nDec. 31, 1974 Dec. 31, 1975\nAdministrative computer center facilities capital $550,000 $450,000\nOther home office facilities capital 420,000 380,000\nTotal 970,000 830,000\nThe assets in the above table generate allowable depreciation or amortization, as explained in Instructions for Form CASB CMF (Basis). Thus they should be included in the asset base for cost of money computation.\nTable II—Home Office Facilities Capital Annual Average Balances\nAdministrative computer center facilities capital $500,000\nOther home office facilities capital 400,000\nTotal 900,000\nThe above averages are based on data in Table I computed in accordance with the criteria in Instructions for Form CASB CMF (Recorded, Leased Property, Corporate).\n$970,000 + $830,000 = $1,800,000 12 = $900,000\nTable III—Home Office Depreciation and Amortization for 1975\nAdministrative computer center facilities capital $100,000\nOther home office facilities capital 40,000\nTotal 140,000\nTable IV—Allocation of ABC Home Office Expenses to Divisions (Business Units)\nTotal expense Allocation of business units\nA B C\nAdministrative computer center $1,800,000 $900,000 $900,000\nOther home office 4,800,000 2,400,000 1,200,000 1,200,000\nTotal 6,600,000 3,300,000 2,100,000 1,200,000\nThe above allocation is carried out in accordance with CAS 403. The expense allocated to individual business units above includes depreciation and amortization as reflected in Table V.\nTable V—Depreciation and Amortization Component of ABC Home Office Expense\nTotal depreciation and amortization expense Allocation of business units\nA B C\nAdministrative computer center $100,000 $50,000 $50,000\nOther home office 40,000 20,000 10,000 10,000\nTotal 140,000 70,000 60,000 10,000\nTable VI—Allocation of Home Office Facilities Capital to Business Units\n(a) Depreciation and amortization allocation in Table V converted to percentages.\nTotal depreciation and amoritzation expense (in percent) Allocation of business units (in percent)\nA B C\nAdministrative computer center 100 50 50\nOther home office 100 50 25 25\n(b) Application of percentages in (a) to average net book values in Table II, in accordance with criteria in Instructions for Form CASB CMF (Recorded, Leased Property, Corporate).\nTotal net book value Allocation of business units\nA B C\nAdministrative computer center facilities capital $500,000 $250,000 $250,000\nOther home office facilities capital 400,000 200,000 100,000 $100,000\nTotal 900,000 450,000 350,000 100,000\nTable VII—“A” Division 1975 Operating Results\nTotal cost input and other work G.\u0026A. Fixed-price CAS-covered contract Cost reimbursement CAS-covered contracts Commercial and other work\nDirect material:\nPurchased parts $2,000,000 $100,000 $100,000 $1,800,000\nSubcontract items 21,530,000 11,750,000 7,205,000 2,575,000\nTotal 23,530,000 11,850,000 7,305,000 4,375,000\nDirector labor and overhead:\nEngineering labor 2,000,000 1,500,000 500,000\nEngineering overhead (80 pct of direct engineering labor) 1,600,000 1,200,000 400,000\nManufacturing labor 3,000,000 1,200,000 200,000 1,600,000\nManufacturing overhead (200 pct of direct management labor) 6,000,000 2,400,000 400,000 3,200,000\nOther direct charges:\nTechnical computer center direct charge 2,280 h at $250/h 570,000 200,000 370,000\nTotal cost input (excluding cost of money) 36,700,000 18,350,000 9,175,000 9,175,000\nG. \u0026 A. (8.99 pct of cost input) 3,300,000 1,650,000 825,000 825,000\nTotal 40,000,000 20,000,000 10,000,000 10,000,000\nTable VIII—Cost Data for the Contract\nPurchased parts $85,000\nSubcontract items 990,000\nTechnical computer time 280 h at $250/h 70,000\nEngineering labor 330,000\nEngineering overhead at 80 pct 264,000\nManufacturing labor 1,210,000\nManufacturing overhead at 200 pct 2,420,000\nTotal cost input (excluding cost of money) 5,369,000\nG \u0026 A. at 8.99 pct 483,000\nTotal cost input and G. \u0026 A. (excluding cost of money) 5,852,000\nTable IX—Division A Facilities Capital\nAverage net book values are computed in accordance with Instructions to Form CASB CMF. Average figures only are given, the underlying beginning and ending balances for 1975 have not been reproduced.\nName of indirect cost pool the asset is associated with Average net book value Annual depreciation\nEngineering overhead $320,000 $40,000\nManufacturing overhead 4,500,000 900,000\nTechnical computer center 450,000 90,000\nOccupancy 3,000,000 200,000\nFacilities capital recorded by division A (see Form CASB CMF instructions for description of recorded) 8,270,000 1,230,000\nAllocated from home office, table VI 450,000\nTotal division A 8,720,000\nTable X—Allocation of Undistributed Facilities Capital\n(a) Occupancy Pool Assets. Total occupancy pool expenses are assumed to be $1,000,000 of which $200,000 is depreciation per Table IX. Allocation of the $3,000,000 net book value of assets per Table IX is performed on the basis of floor space utilization.\nIndirect cost pool Occupancy expense and depreciation allocation Percent of total floor space utilized Asset allocation\nEngineering $200,000 20 $600,000\nManufacturing 750,000 75 2,250,000\nTechnical computer 50,000 5 150,000\nTotal 1,000,000 100 3,000,000\n(b) Technical Computer Center Assets. Total technical computer center expenses for the year are assumed to be $770,000 including $90,000 depreciation per Table IX and $50,000 charge from the occupancy pool per paragraph (a) of this table. A charging rate of $250 per hour is computed assuming a total of 3,080 chargeable CPU hours per annum. The net book value of assets amounting to $600,000 ($450,000 per Table IX plus the $150,000 allocated per (a) above) is allocated on the basis of CPU hours utilized.\nOverhead pool or cost objective Hours charged Amount charged Percent Asset allocation\nFixed price contracts, table VII 800 $200,000 26 $156,000\nCost reimbursement contracts, table VII 1,480 370,000 48 288,000\nEngineering overhead pool 800 200,000 26 156,000\nTotal 3,080 770,000 100 600,000\n(c) Summary of Undistributed Facilities Capital Allocation. Undistributed (per Table IX).\nTechnical computer center $450,000\nOccupancy 3,000,000\nTotal 3,450,000\nDistribution per paragraph (a) or (b) of this table of balances to overhead pools that result in charges direct to final cost objectives.\nOverhead pool (a) (b) Total\nEngineering $600,000 $156,000 $756,000\nManufacturing 2,250,000 2,250,000\nTechnical computer center (direct charge to contracts) 444,000 444,000\nTotal 2,850,000 600,000 3,450,000\nTable XIII—Summary of Cost of Money Computation on Facilities Capital\n[Cost of money excluded from total cost input]\nAllocation base Allocated to contract, table VIII Computation using regular facilities, capital cost of money factor, table XI Amount Computation using alternative facilities capital, cost of money factor, table XI Amount\nEngineering labor $330,000 0.04304 $14,203 0.0128 $4,244\nManufacturing labor 1,210,000 .18 217,800 .12 145,200\nTechnical computer time 1 280 15.57895 4,362\nCost input $5,369,000 .00098 5,261 .00850 45,636\nTotal cost of money on facilities capital 241,626 195,060\n1 Hours.\nVariation II—Total Cost Input Allocation Base Includes Cost of Money\nTable XIV—Recomputation of “A” Division Total Cost Input To Reflect Inclusion of Cost of Money\n(a) Regular method:\nTotal cost input per table VII $36,700,000\nCost of money applicable to facilities capital identified with overhead pools per subtotal in column 5, table XV 661,600\nTotal cost input including cost of money 37,361,600\n(b) Alternative method:\nTotal cost input per table VII 36,700,000\nCost of money applicable to facilities capital identified with overhead pools per subtotal in column 5, table XVI 385,600\nTotal cost input including cost of money 37,085,900\nTable XVII—Summary of Cost of Money Computation on Facilities Capital\n[Cost of money included in total cost input—regular method]\nAllocation base Allocated to contract, table VIII Computation using regular facilities, capital cost of money factor, table XV Amount\nEngineering labor $330,000 0.04304 $14,203\nManufacturing labor 1,210,000 .18 217,800\nTechnical computer time 1 280 15.57895 4,362\nCost of money related to overheads 236,365\nCost of money above to be included in cost input 236,365\nCost input, table VIII 5,369,000\nCost input including cost of money 5,605,365 .00096 5,381\nTotal cost of money on facilities capital 241,674\n1 Hours.\nTable XVIII—Summary of Cost of Money Computation on Facilities Capital\n[Cost of money included in total cost input—alternative method]\nAllocation base Allocated to contract, table VIII Computation using alternative facilities, capital cost of money factor, table XVI Amount\nEngineering labor $330,000 0.0128 $4,224\nManufacturing labor 1,210,000 .12 145,200\nCost of money related to overheads 149,424\nCost of money above to be included in cost input 149,424\nCost input, table VIII 5,369,000\nCost input including cost of money 5,518,424 .00841 46,410\nTotal cost of money on facilities capital 5,518,424 195,834","path":["Title 48—Federal Acquisition Regulations System","CHAPTER 99—COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET","SUBCHAPTER B—PROCUREMENT PRACTICES AND COST ACCOUNTING STANDARDS","PART 9904—COST ACCOUNTING STANDARDS"],"source_url":"https://www.ecfr.gov/api/versioner/v1/full/2026-08-25/title-48.xml","current_through":"2026-08-25","vintage":"","retrieved_at":"2026-08-27T02:26:29Z","sha256":"f3c64265d373d63557d8a029e6a49755561dd16bd2b0193de435fee8c4fe9078","source_id":"us-cfr","stale":true,"prev":"us/48-cfr-9904.414-63","next":"us/48-cfr-9904.415"},"notice":"GroundRules: Original legal text. Not legal advice."}