True statement about contractor costs?

True statement about contractor costs?

• A. General and Administrative (G&A) costs are part of the fully burdened cost.
• B. G&A costs are excluded from pricing
• C. Fringe benefits are never included
• D. Only direct labor is included in cost

Answer: (A)

Understanding fully burdened cost means recognizing that the price a contractor charges covers not just direct labor but all the indirect costs that support the work. General and Administrative costs fall into the indirect category and are allocated to contracts through the G&A rate, so they become part of the fully burdened cost. Fringe benefits are also included in the overall cost structure, typically rolled into the labor rate or a fringe rate, so they contribute to the total price as well. Saying that only direct labor is included ignores these essential cost pools and would understate the true cost. Likewise, G&A costs are not excluded from pricing; they are a normal and necessary part of delivering the contract.

Understanding fully burdened cost means recognizing that the price a contractor charges covers not just direct labor but all the indirect costs that support the work. General and Administrative costs fall into the indirect category and are allocated to contracts through the G&A rate, so they become part of the fully burdened cost. Fringe benefits are also included in the overall cost structure, typically rolled into the labor rate or a fringe rate, so they contribute to the total price as well. Saying that only direct labor is included ignores these essential cost pools and would understate the true cost. Likewise, G&A costs are not excluded from pricing; they are a normal and necessary part of delivering the contract.