CLC 056 Analyzing Contract Costs Exam Questions and Answers | CLC 056 Contract
Cost Analysis Study Guide 2026/2027 | Defense Acquisition University (DAU)
Contracting Training | Cost Analysis, Price Analysis, Cost Realism, Certified Cost or
Pricing Data, FAR 15.4, Proposal Analysis, Cost Estimating, Improvement Curves,
Regression Analysis, Sampling, Indirect Costs & Price Negotiation | Practice
Questions, Answers & Detailed Explanations
Question 1: When analyzing a contractor's direct material costs under FAR Part 31, which of
the following costs is generally considered an allowable direct material cost?
A. Normal spoilage occurring during the manufacturing process
B. Scrap proceeds credited to the job
C. Cost of raw materials that are not incorporated into the end product but are used in the
manufacturing process
D. Cost of materials purchased for a specific contract but later used on another contract
without the government's knowledge
CORRECT ANSWER: C. Cost of raw materials that are not incorporated into the end product
but are used in the manufacturing process
Rationale: FAR 31.202 defines direct materials as those that become a part of the finished
product or are used in the process of production. Option C describes raw materials used in the
process, which is allowable. Normal spoilage (A) is usually factored into overhead, not direct
material. Scrap proceeds (B) are a credit against costs. Option D represents a mischarging of
costs.
Question 2: Under the Concept of Total Cost, what is the primary condition that must exist for
the government to use this method in a claim situation?
A. The contractor must have a perfect accounting system
B. The contractor's actual costs must be reasonable and allocable
C. The contractor must be able to prove that its costs are less than the estimated costs
D. It is impossible to determine actual costs to any greater degree of accuracy
CORRECT ANSWER: D. It is impossible to determine actual costs to any greater degree of
accuracy
Rationale: The Total Cost method is a last resort. It is only acceptable when it is impossible to
determine the actual costs or damages to a greater degree of accuracy. It is not preferred
simply because costs are reasonable (B) or because an accounting system is perfect (A).
Question 3: Which of the following best defines the term 'allocable' as it pertains to contract
costs?
,A. A cost is incurred specifically for the contract
B. A cost is reasonable in amount and nature
C. A cost is assignable to a particular cost objective in accordance with relative benefits received
D. A cost is incurred consistently with Generally Accepted Accounting Principles (GAAP)
CORRECT ANSWER: C. A cost is assignable to a particular cost objective in accordance with
relative benefits received
Rationale: FAR 31.201-4 defines allocability. A cost is allocable if it is assignable to one or more
cost objectives on the basis of relative benefits received, or other equitable relationships.
Option A describes a direct cost, while B describes reasonableness, and D describes consistency.
Question 4: In the context of a cost analysis, what is the primary purpose of conducting a
'should-cost' review?
A. To verify the historical costs of the contractor
B. To challenge the necessity and amount of individual cost elements, identifying inefficiencies
C. To ensure the contractor’s accounting system is compliant with CAS
D. To determine the lowest possible price based on market rates
CORRECT ANSWER: B. To challenge the necessity and amount of individual cost elements,
identifying inefficiencies
Rationale: A should-cost review is a specialized form of cost analysis that evaluates the
contractor's performance and identifies areas of inefficiency. It asks "what should the cost be"
rather than just verifying what the cost "is" (A).
Question 5: When analyzing a contractor's labor costs, what is the primary purpose of a labor
floor check?
A. To verify that the employee's timekeeping records are accurate
B. To calculate the employee's fringe benefit accrual
C. To verify that the employee exists, is working at the stated location, and is performing the
stated function
D. To compare the employee's salary against the market average
CORRECT ANSWER: C. To verify that the employee exists, is working at the stated location,
and is performing the stated function
Rationale: A floor check is an on-site observation to validate that the contractor is actually
performing the work and charging the time. It prevents phantom labor or charging labor to a
,contract when the employee is working on another task. While it supports record accuracy (A),
its primary function is physical observation.
Question 6: The Allowable Cost and Payment clause (FAR 52.216-7) requires the contractor to
submit what type of documentation to support billing?
A. A certified cost or pricing data submission
B. A public voucher or invoice
C. A cost accounting standards disclosure statement
D. A certified final indirect cost rate proposal
CORRECT ANSWER: B. A public voucher or invoice
Rationale: FAR 52.216-7 outlines the invoicing procedures. It requires the contractor to submit
a public voucher or invoice (Standard Form 1034) for payment. Certified cost or pricing data (A)
is for pricing modifications, not routine billing.
Question 7: Which of the following costs is expressly unallowable under FAR Part 31,
regardless of the contractor’s accounting treatment?
A. Depreciation on assets used in manufacturing
B. Costs of lobbying activities
C. Employee pension plan contributions
D. Insurance premiums for workers' compensation
CORRECT ANSWER: B. Costs of lobbying activities
Rationale: FAR 31.205-22 specifically identifies lobbying costs as unallowable. Depreciation (A),
pensions (C), and insurance (D) are generally allowable subject to specific limitations and
conditions.
Question 8: In analyzing an engineering labor rate, what is the key difference between
'escalation' and 'productivity' adjustments?
A. Escalation adjusts for changes in the market wage index, while productivity adjusts for
changes in the efficiency of labor
B. Escalation adjusts for overtime, while productivity adjusts for learning curves
C. Escalation adjusts for future cost increases, while productivity adjusts for past cost decreases
D. There is no difference; they are synonyms in cost analysis
, CORRECT ANSWER: A. Escalation adjusts for changes in the market wage index, while
productivity adjusts for changes in the efficiency of labor
Rationale: Escalation (or labor cost escalation) refers to the increase in wage rates over time
due to inflation or market conditions. Productivity adjustments reflect changes in the efficiency
of the workforce (e.g., learning curves, process improvements).
Question 9: When reviewing a contractor's indirect cost pool, which of the following is a
characteristic of a 'homogeneous' indirect cost pool?
A. It contains only fringe benefit costs
B. It contains costs that have the same or similar relationship to the cost objectives being
served
C. It contains only facility-related costs
D. It contains costs that have been approved by the DCAA
CORRECT ANSWER: B. It contains costs that have the same or similar relationship to the cost
objectives being served
Rationale: To ensure accurate allocation, indirect costs should be grouped into homogeneous
pools. This means the costs within the pool share a similar relationship to the bases they are
allocated to (e.g., fringe benefits allocated based on direct labor dollars).
Question 10: The 'Variance Analysis' technique in cost analysis primarily focuses on:
A. Comparing the budgeted cost to the actual cost for a specific period
B. Comparing the contractor's proposed costs to the government's independent estimate
C. Comparing the current period's actual costs to the previous period's actual costs
D. Comparing the total contract value to the estimated profit
CORRECT ANSWER: A. Comparing the budgeted cost to the actual cost for a specific period
Rationale: Variance analysis is a management and analysis tool that explains the difference
between planned (budgeted) costs and actual incurred costs. It breaks down the variance into
price and volume (efficiency) components.
Question 11: According to FAR 31.201-6, what is the general rule regarding the allowability of
costs incurred for 'irregularities'?
A. They are allowable if they are immaterial
B. They are unallowable unless the contracting officer determines they were unavoidable
Cost Analysis Study Guide 2026/2027 | Defense Acquisition University (DAU)
Contracting Training | Cost Analysis, Price Analysis, Cost Realism, Certified Cost or
Pricing Data, FAR 15.4, Proposal Analysis, Cost Estimating, Improvement Curves,
Regression Analysis, Sampling, Indirect Costs & Price Negotiation | Practice
Questions, Answers & Detailed Explanations
Question 1: When analyzing a contractor's direct material costs under FAR Part 31, which of
the following costs is generally considered an allowable direct material cost?
A. Normal spoilage occurring during the manufacturing process
B. Scrap proceeds credited to the job
C. Cost of raw materials that are not incorporated into the end product but are used in the
manufacturing process
D. Cost of materials purchased for a specific contract but later used on another contract
without the government's knowledge
CORRECT ANSWER: C. Cost of raw materials that are not incorporated into the end product
but are used in the manufacturing process
Rationale: FAR 31.202 defines direct materials as those that become a part of the finished
product or are used in the process of production. Option C describes raw materials used in the
process, which is allowable. Normal spoilage (A) is usually factored into overhead, not direct
material. Scrap proceeds (B) are a credit against costs. Option D represents a mischarging of
costs.
Question 2: Under the Concept of Total Cost, what is the primary condition that must exist for
the government to use this method in a claim situation?
A. The contractor must have a perfect accounting system
B. The contractor's actual costs must be reasonable and allocable
C. The contractor must be able to prove that its costs are less than the estimated costs
D. It is impossible to determine actual costs to any greater degree of accuracy
CORRECT ANSWER: D. It is impossible to determine actual costs to any greater degree of
accuracy
Rationale: The Total Cost method is a last resort. It is only acceptable when it is impossible to
determine the actual costs or damages to a greater degree of accuracy. It is not preferred
simply because costs are reasonable (B) or because an accounting system is perfect (A).
Question 3: Which of the following best defines the term 'allocable' as it pertains to contract
costs?
,A. A cost is incurred specifically for the contract
B. A cost is reasonable in amount and nature
C. A cost is assignable to a particular cost objective in accordance with relative benefits received
D. A cost is incurred consistently with Generally Accepted Accounting Principles (GAAP)
CORRECT ANSWER: C. A cost is assignable to a particular cost objective in accordance with
relative benefits received
Rationale: FAR 31.201-4 defines allocability. A cost is allocable if it is assignable to one or more
cost objectives on the basis of relative benefits received, or other equitable relationships.
Option A describes a direct cost, while B describes reasonableness, and D describes consistency.
Question 4: In the context of a cost analysis, what is the primary purpose of conducting a
'should-cost' review?
A. To verify the historical costs of the contractor
B. To challenge the necessity and amount of individual cost elements, identifying inefficiencies
C. To ensure the contractor’s accounting system is compliant with CAS
D. To determine the lowest possible price based on market rates
CORRECT ANSWER: B. To challenge the necessity and amount of individual cost elements,
identifying inefficiencies
Rationale: A should-cost review is a specialized form of cost analysis that evaluates the
contractor's performance and identifies areas of inefficiency. It asks "what should the cost be"
rather than just verifying what the cost "is" (A).
Question 5: When analyzing a contractor's labor costs, what is the primary purpose of a labor
floor check?
A. To verify that the employee's timekeeping records are accurate
B. To calculate the employee's fringe benefit accrual
C. To verify that the employee exists, is working at the stated location, and is performing the
stated function
D. To compare the employee's salary against the market average
CORRECT ANSWER: C. To verify that the employee exists, is working at the stated location,
and is performing the stated function
Rationale: A floor check is an on-site observation to validate that the contractor is actually
performing the work and charging the time. It prevents phantom labor or charging labor to a
,contract when the employee is working on another task. While it supports record accuracy (A),
its primary function is physical observation.
Question 6: The Allowable Cost and Payment clause (FAR 52.216-7) requires the contractor to
submit what type of documentation to support billing?
A. A certified cost or pricing data submission
B. A public voucher or invoice
C. A cost accounting standards disclosure statement
D. A certified final indirect cost rate proposal
CORRECT ANSWER: B. A public voucher or invoice
Rationale: FAR 52.216-7 outlines the invoicing procedures. It requires the contractor to submit
a public voucher or invoice (Standard Form 1034) for payment. Certified cost or pricing data (A)
is for pricing modifications, not routine billing.
Question 7: Which of the following costs is expressly unallowable under FAR Part 31,
regardless of the contractor’s accounting treatment?
A. Depreciation on assets used in manufacturing
B. Costs of lobbying activities
C. Employee pension plan contributions
D. Insurance premiums for workers' compensation
CORRECT ANSWER: B. Costs of lobbying activities
Rationale: FAR 31.205-22 specifically identifies lobbying costs as unallowable. Depreciation (A),
pensions (C), and insurance (D) are generally allowable subject to specific limitations and
conditions.
Question 8: In analyzing an engineering labor rate, what is the key difference between
'escalation' and 'productivity' adjustments?
A. Escalation adjusts for changes in the market wage index, while productivity adjusts for
changes in the efficiency of labor
B. Escalation adjusts for overtime, while productivity adjusts for learning curves
C. Escalation adjusts for future cost increases, while productivity adjusts for past cost decreases
D. There is no difference; they are synonyms in cost analysis
, CORRECT ANSWER: A. Escalation adjusts for changes in the market wage index, while
productivity adjusts for changes in the efficiency of labor
Rationale: Escalation (or labor cost escalation) refers to the increase in wage rates over time
due to inflation or market conditions. Productivity adjustments reflect changes in the efficiency
of the workforce (e.g., learning curves, process improvements).
Question 9: When reviewing a contractor's indirect cost pool, which of the following is a
characteristic of a 'homogeneous' indirect cost pool?
A. It contains only fringe benefit costs
B. It contains costs that have the same or similar relationship to the cost objectives being
served
C. It contains only facility-related costs
D. It contains costs that have been approved by the DCAA
CORRECT ANSWER: B. It contains costs that have the same or similar relationship to the cost
objectives being served
Rationale: To ensure accurate allocation, indirect costs should be grouped into homogeneous
pools. This means the costs within the pool share a similar relationship to the bases they are
allocated to (e.g., fringe benefits allocated based on direct labor dollars).
Question 10: The 'Variance Analysis' technique in cost analysis primarily focuses on:
A. Comparing the budgeted cost to the actual cost for a specific period
B. Comparing the contractor's proposed costs to the government's independent estimate
C. Comparing the current period's actual costs to the previous period's actual costs
D. Comparing the total contract value to the estimated profit
CORRECT ANSWER: A. Comparing the budgeted cost to the actual cost for a specific period
Rationale: Variance analysis is a management and analysis tool that explains the difference
between planned (budgeted) costs and actual incurred costs. It breaks down the variance into
price and volume (efficiency) components.
Question 11: According to FAR 31.201-6, what is the general rule regarding the allowability of
costs incurred for 'irregularities'?
A. They are allowable if they are immaterial
B. They are unallowable unless the contracting officer determines they were unavoidable
