1. A contract requires extra effort for planning and cost management where it hired extra people and wants to direct charge them to the contract. The contractor has other people performing the same functions for more than one contract where their labor is charged indirect. Answer. Since the work being performed is the same and the only difference is in the amount of effort required, this practice would not comply with CAS 402. The contractor must either (1) charge all of these costs indirect or (2) direct charge all of these costs. (Editor’s Note. The Bender text states if the extra effort is really a different effort but the contractor classifies it as planning and cost management then the extra effort may be treated as a direct cost. This is because the different effort is unique to the contract and is not performed for other contracts.)

2. A contractor has hundreds of cranes located throughout the shipyard where their maintenance, taxes and depreciation costs are recorded in a general account and allocated to department overhead pools. The Dry Dock has the cost of eight cranes charged directly to its department overhead pool because their use is unique to Dry Dock operations. Answer. Since the Dry Dock cranes are used for special purposes and the Yard cranes for general, this practice does not result in "double counting" i.e. direct charging a contract costs normally charged indirect and then allocating to the contract a portion of the remaining indirect costs. However, if any of the Yard cranes are also used for special purposes (e.g. new ship construction) the practice would result in double counting. In this case, the special purpose cranes need to be eliminated from the general account and charged directly to the using department.

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