For a cost to be allocable to a contract, it must be a cost incurred specifically for a contract, or a cost that is beneficial to both the contract and other work, or ______.

For a cost to be allocable to a contract, it must be a cost incurred specifically for a contract, or a cost that is beneficial to both the contract and other work, or ______.

• A. A cost that is necessary for the overall operation of the business but not directly related to a contract
• B. A cost that is necessary for the contract but not for other work
• C. A cost that is allocated to unrelated programs
• D. A cost that is unused and unbilled

Answer: (C)

Allocable costs are those that the contract should bear because they directly support the contract or because they benefit multiple tasks and can be assigned using the contractor’s approved allocation methods. When a cost helps keep the business running and is allocated across several programs through established overhead or cost-sharing procedures, it can be allocated to the contract even though it also supports unrelated programs. This shared-cost approach ensures the contract bears a fair portion of costs that enable the organization to operate and deliver work, not just those tied to a single project. So, costs that are common to more than one program and are allocated to those programs under an approved plan are considered allocable to the contract as well, which is why a cost allocated to unrelated programs can be allocable to a given contract.

Allocable costs are those that the contract should bear because they directly support the contract or because they benefit multiple tasks and can be assigned using the contractor’s approved allocation methods. When a cost helps keep the business running and is allocated across several programs through established overhead or cost-sharing procedures, it can be allocated to the contract even though it also supports unrelated programs. This shared-cost approach ensures the contract bears a fair portion of costs that enable the organization to operate and deliver work, not just those tied to a single project.

So, costs that are common to more than one program and are allocated to those programs under an approved plan are considered allocable to the contract as well, which is why a cost allocated to unrelated programs can be allocable to a given contract.