![]() ![]() Let’s say that 1,000 square-feet of a 4,000 square-foot office is occupied by accounting personnel and marketing staff, and the other 3,000 square-feet is occupied by project managers and staff that works on contracts. For example, a facilities expense could be allocated using square footage of the office. These types of costs should be split using a reasonable basis of allocation. Facilities expenses, such as rent and utilities, are prime examples of costs that can be proportionately shared between the two cost pools. Overhead and G&A costs can also be shared. G&A pools include independent research and development (IR&D) salaries and applicable fringe benefits, bid and proposal (B&P) labor and applicable fringe benefits, applied overhead, other IR&D and B&P costs, accounting, board expenses, depreciation, dues and subscriptions, office rent, office supplies, meetings, business development activities, state and local taxes, and business insurance. ![]() G&A costs are all other costs necessary to run the business, such as business insurance and accounting costs. In this instance, the offsite overhead pool might include costs for facilities and/or depreciation of office equipment used for contracts, whereas onsite might not include these costs. The term “onsite” refers to work that is performed directly at a government’s facility. Overhead poolscan be further broken down into onsite and offsite overhead pools. ![]() All costs that contribute to the ultimate completion of the contract but cannot be expressly allocated to one particular contract can be classified as overhead costs. In addition, overhead costs could consist of overhead salaries, applicable fringe benefits on those salaries, insurance, supplies, printing costs, temporary staff, training and education, office rent, local travel, meals, and repair and maintenance. Overhead costs also include costs related to the ultimate completion of a direct contract, such as supplies purchased and used on multiple contracts. For example, the wages of a supervisor, who oversees employees working on many contracts but does not directly contribute to the contracts, would be considered overhead costs. Overhead costs are attributable to labor but not directly attributable to a contract. Here are some examples that will help provide clarity when deciding how to allocate different types of costs. Some examples of fringe benefit costs include payroll taxes (i.e., Social Security, Medicare, state and federal unemployment taxes), paid leave (i.e., vacation, holiday leave, jury duty, other leave), and other benefits (health and dental insurance, 401(k), etc.).ĭeciding whether a cost should be included in the overhead cost pool or the G&A cost pool can be challenging, as the standards give some latitude when it comes to the definitions of each pool. These cost pools might include fringe benefits, overhead, or general and administrative (G&A) costs. Indirect costs, which are costs that cannot be directly allocated to a specific contract, can be grouped into one or more cost pools. One of the biggest challenges for government contractors is properly allocating indirect costs into the right cost pools. Complete the table to find the cost of goods manufactured for both Garcon Company and Pepper Company for the year ended December 31, 2019.As a government contractor, you are required to properly segregate and track your costs in accordance with the standards defined in the Federal Acquisition Regulation (FAR). Garcon Company Pepper Company Beginning finished goods inventory $14,700 $19,450 Beginning work in process inventory 17,900 19,950 Beginning raw materials inventory (direct materials) 7,100 12,300 Rental cost on factory equipment 32,500 25,000 Direct labor 20,200 37,800 Ending finished goods inventory 19,250 14,800 Ending work in process inventory 24,100 21,400 Ending raw materials inventory 6,400 8,000 Factory utilities 12,900 12,750 Factory supplies used (indirect materials) 10,900 4,300 General and administrative expenses 26,500 46,000 Indirect labor 2,300 8,800 Repairs-Factory equipment 7,460 2,000 Raw materials purchases 43,000 68,500 Selling expenses 60,800 46,000 Sales 231,030 302,510 Cash 31,000 20,200 Factory equipment, net 227,500 166,825 Accounts receivable, net 16,200 24,700 Required: 1. The following data is provided for Garcon Company and Pepper Company.
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