Guide to Contract Pricing, 5th Edition

CHAPTER 7

Analysis of Direct Material and Other Direct Costs

As has been previously stated, FAR 2.101 describes a direct cost as “any cost that can be identified specifically with a particular final cost objective.” We have been using terms somewhat simpler than “final cost objective” and will continue to do so. For our purposes, the final cost objective is a term for proposed contract, task, or work. FAR 31.202 states the following:

(b) For reasons of practicality, any direct cost of minor dollar amount may be treated as an indirect cost if the accounting treatment— (1) Is consistently applied to all cost objectives; and (2) Produces substantially the same results as treating the cost as a direct cost.

The above aspect of the FAR description ...