CLC 056 Analyzing Contract Costs
Examination – Defense Acquisition
University (DAU) – 2026/2027 Academic
Year – 55 Questions and Answers Covering
Four Core Domains
Domain 1: Contract Cost Analysis Fundamentals
Question 1:
What is the primary purpose of analyzing contract costs in defense acquisition?
A) To ensure the lowest possible price
B) To determine if proposed costs are reasonable, allowable, and allocable
C) To expedite the contracting process
D) To reduce paperwork requirements
Correct Answer: B) To determine if proposed costs are reasonable, allowable,
and allocable
Rationale: Contract cost analysis is essential to ensure that costs submitted by
contractors are reasonable (not excessive), allowable (permitted under FAR and
contract terms), and allocable (properly assigned to the contract). This analysis
protects government interests and ensures fair pricing.
Question 2:
Under the Federal Acquisition Regulation (FAR), which type of cost is generally
considered unallowable?
A) Direct labor costs
B) Advertising and public relations costs
C) Material costs
D) Overhead costs
Correct Answer: B) Advertising and public relations costs
Rationale: FAR Part 31 identifies certain costs as unallowable, including advertising
and public relations costs (except those required for contract performance),
entertainment expenses, and lobbying costs. These costs cannot be charged to
government contracts.
, Question 3:
Direct costs are defined as:
A) Costs that benefit multiple contracts
B) Costs that can be specifically identified with a particular contract
C) Costs that are incurred regardless of contract performance
D) Costs that are evenly distributed across all contracts
Correct Answer: B) Costs that can be specifically identified with a particular
contract
Rationale: Direct costs are those that can be specifically identified with a particular
final cost objective, such as a specific contract. Examples include direct labor, direct
materials, and other costs directly attributable to contract performance.
Question 4:
Indirect costs are characterized by:
A) Being easily traceable to a specific contract
B) Being incurred for the benefit of multiple contracts
C) Being always unallowable
D) Being fixed in nature
Correct Answer: B) Being incurred for the benefit of multiple contracts
Rationale: Indirect costs are incurred for the benefit of multiple cost objectives and
cannot be easily traced to a single contract. These costs must be allocated to
contracts using appropriate allocation bases such as direct labor hours or direct labor
dollars.
Question 5:
Cost Accounting Standards (CAS) are designed to:
A) Increase contractor profits
B) Promote consistency and uniformity in cost accounting practices
C) Reduce government oversight
D) Simplify contract negotiations
Correct Answer: B) Promote consistency and uniformity in cost accounting
practices
Rationale: CAS establishes standards for measuring, assigning, and allocating costs
to government contracts. The standards promote consistency and uniformity in cost
accounting practices, ensuring that government contracts are priced fairly and
equitably.
Examination – Defense Acquisition
University (DAU) – 2026/2027 Academic
Year – 55 Questions and Answers Covering
Four Core Domains
Domain 1: Contract Cost Analysis Fundamentals
Question 1:
What is the primary purpose of analyzing contract costs in defense acquisition?
A) To ensure the lowest possible price
B) To determine if proposed costs are reasonable, allowable, and allocable
C) To expedite the contracting process
D) To reduce paperwork requirements
Correct Answer: B) To determine if proposed costs are reasonable, allowable,
and allocable
Rationale: Contract cost analysis is essential to ensure that costs submitted by
contractors are reasonable (not excessive), allowable (permitted under FAR and
contract terms), and allocable (properly assigned to the contract). This analysis
protects government interests and ensures fair pricing.
Question 2:
Under the Federal Acquisition Regulation (FAR), which type of cost is generally
considered unallowable?
A) Direct labor costs
B) Advertising and public relations costs
C) Material costs
D) Overhead costs
Correct Answer: B) Advertising and public relations costs
Rationale: FAR Part 31 identifies certain costs as unallowable, including advertising
and public relations costs (except those required for contract performance),
entertainment expenses, and lobbying costs. These costs cannot be charged to
government contracts.
, Question 3:
Direct costs are defined as:
A) Costs that benefit multiple contracts
B) Costs that can be specifically identified with a particular contract
C) Costs that are incurred regardless of contract performance
D) Costs that are evenly distributed across all contracts
Correct Answer: B) Costs that can be specifically identified with a particular
contract
Rationale: Direct costs are those that can be specifically identified with a particular
final cost objective, such as a specific contract. Examples include direct labor, direct
materials, and other costs directly attributable to contract performance.
Question 4:
Indirect costs are characterized by:
A) Being easily traceable to a specific contract
B) Being incurred for the benefit of multiple contracts
C) Being always unallowable
D) Being fixed in nature
Correct Answer: B) Being incurred for the benefit of multiple contracts
Rationale: Indirect costs are incurred for the benefit of multiple cost objectives and
cannot be easily traced to a single contract. These costs must be allocated to
contracts using appropriate allocation bases such as direct labor hours or direct labor
dollars.
Question 5:
Cost Accounting Standards (CAS) are designed to:
A) Increase contractor profits
B) Promote consistency and uniformity in cost accounting practices
C) Reduce government oversight
D) Simplify contract negotiations
Correct Answer: B) Promote consistency and uniformity in cost accounting
practices
Rationale: CAS establishes standards for measuring, assigning, and allocating costs
to government contracts. The standards promote consistency and uniformity in cost
accounting practices, ensuring that government contracts are priced fairly and
equitably.
