1. The aircraft service center costs are charged to contracts based on pilot flight time. If the CEO takes a flight on corporate business not directly related to a contract, no charges are made i.e. the costs remain in the center cost pool. Answer. This is an inconsistency addressed by CAS 402. If the service center costs are charged directly to contracts then the cost pools benefiting from the service center should also be charged so a charge for the CEO’s travel should be made to the G&A expense pool.

2. A contractor has two business units, one in Phoenix and one in Denver. At the Phoenix location all travel costs are charged directly to contracts while in Denver, travel costs are included in appropriate overhead and G&A pools. Answer. This is not a CAS compliance issue because CAS compliance focuses on the business unit level. Therefore, different business units are not required to have the same distinctions for direct and indirect costs.

3. A contractor has two plants in one of its business units. In Plant 1, electricity for the factory is metered to each machine and department where electricity identified with a machine is allocated to contracts on the basis of machine hours while electricity identified to a department is included in the department’s overhead. In Plant 2, the company only meters the amount of electricity to the factory and this electricity is included in the plant-wide overhead. There are no overhead pools allocated to both plants. Answer. CAS 402 would cover this since there is only one business unit but since there is not an inconsistency between direct and indirect classifications (the inconsistency is the difference in accounting for indirect costs between the two plants) there is no CAS 402 noncompliance.