Value Added G\u0026a Base

A value-added cost input base is total cost input less material and subcontract costs. (3) A single element cost input base; e.g., direct labor hours or direct labor dollars, which represents the total activity of a business unit may be used to allocate the G&A expense pool where it produces equitable results. In its response, Len summarized his early position paper, asserting the value-added cost base isappropriate when inclusion of material and subcontractor costs would significantly distort the allocation of the G&A expense pool in relation to benefits received.

The breakdown of direct labor and direct materials/subcontractors was. Base - Examples: Direct Labor (hours or dollars), Direct Materials, Head count, Total Cost Input or Value Added Base, Quantity of Computers, Number of Machine Hours, Square footage, etc. The value added base is one of three accepted methods under CAS 410 - Allocation of Business Unit General & Administrative Expenses to Final Cost Objectives.

Contractors can adopt a value-added General and Administrative (G&A) rate when proper cost accounting procedures justify its use. In addition, in accordance with CAS 410-50 (d), the allocation base must be either (a) total cost input, (b) value-added cost input, or (c) single element cost input. The determination of which allocation base best represents total activity of a business unit is determined on the basis of the circumstances of each business unit.

48 CFR Ch. 99 (10-1-21 Edition) clude all significant elements of that cost input which represent the total activity of the business unit. The cost input base selected to represent the total activity of a business unit during cost accounting period may be: Total cost input; value-added cost input; or single element cost input.

The deter. A Value-Added (VA) Input Base is total cost input (defined above) less direct material and subcontract costs. This base is used when the inclusion of material and subcontract costs significantly distorts the allocation of G&A in relation to the benefits received.

So the net effect was they provided a value-added service to the government by way of a one-off procurement of materials and those materials were added to Total Cost Input base, and it backfired. Had they previously incorporated a Value Added base with a separate material handling pool, their G&A base would not have been impacted as dramatically. General and Administrative (G&A) expenses are grouped together into an overall G&A pool.

In allocating the G&A indirect cost pool across contracts or product lines, businesses create a G&A "base," which is divided into the total G&A cost pool to derive a rate. For example, a company may have a total cost input (TCI) consisting of direct and indirect manufacturing costs, direct and indirect.