BUS 315 Cost and Price Analysis Week 9 Discussion 1, business and finance homework help

  

“Facility Costs” Please respond to the following:Suppose you have been working with the federal government for a period of time, and you decide to form a small company. Explain the difference between depreciation and the facilities capital cost of money. Specify the key advantages of having facilities capital cost of money as an allowable cost. Justify your response.Compare and contrast the facility costs of VectorCal and the US Government. Determine at least two advantages for using facility costs for both VectorCal and the US Government. Explain your rationale.bus315_week_9_scenario_script.docxbus315_w9_p1.pptx
bus315_week_9_scenario_script.docx

bus315_w9_p1.pptx

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BUS315 Week 9 Scenario Script: Concept of Facilities Capital Cost of Money and the
Procedure for Determining FCCOM
Slide #
Topics
Narration
Slide 1
Scene 1
Semi-large building
(VectorCal) and have avatar
inserted to represent her
entering the building
Slide 2
Scene 2
Introduction to the week
Takes place in Dominic’s
office
Dominic: Welcome back Sally! I hope you
enjoyed working with me last week and gained
some valuable knowledge about the different
types of expenses we went over last week.
Sally: Thanks Dominic! You were very helpful
and explained the various types of expenses quite
well. I feel very confident with my understanding
of these topics. I am excited to see what I will be
working on this week!
Dominic: I appreciate your enthusiasm! I hope
you are ready for another week full of learning, as
you will be working with me again this week.
Sally: That is fantastic! What will you be
covering today?
Dominic: I thought this week we would talk
about some other key factors to take into
consideration when dealing with government
contracts.
Sally: It sounds like this will be a very interesting
week indeed. I’m ready to get started!
Slide 3
Scene 3
Dominic’s office to go over
key concepts related to the
concept of Facilities Capital
Cost Of Money
Dominic: Let’s begin by talking about contractors
and the government contracts they fulfill. Keep in
mind that when a contractor does work on a
government contract, the government gets
benefits from the facilities that the contractor
uses. Based on your schooling, do you remember
anything about what the Cost Accounting
Standards Board developed in relation to these
government contracts?
Sally: I recall that the Cost Accounting Standards
Board developed Cost Accounting Standard 414
or the Cost of Money as an Element of the Cost
of Facilities Capital, to meet the needs of paying
contractors properly for the use of their facilities.
Dominic: Very good! These standards then
allowed for the Facilities Cost of Capital to be
deemed an imputed cost. When I say imputed, I
mean a cost that can be inferred from the
contractor’s use of capital funds to buy the
facilities.
Sally: That makes a lot of sense. Thanks for
explaining that term for me. I never heard that
term used before.
Dominic: Not a problem at all. That’s why I am
here; to provide you with clarity for things you
may not understand. (laughter) Remember that
the basic idea of the Facilities Capital Cost of
Money is pretty straightforward. Using a form
developed specifically to determine the Facilities
Capital Cost, the contractor first computes the
cost of the facilities devoted to contract work
during the accounting period. This value is
referred to as the Facilities Capital. Do you
recall how this value is determined?
Sally: It is my understanding that the Facilities
Capital is determined only for actual tangible
assets or intangible assets that are subject to
amortization. Am I correct?
Dominic: You are quite right, excellent work!
Once this value is determined, an interest rate is
then applied to the value. The result is an
imputed cost of the facilities capital devoted to
contract work for the period. Then the contractor
can, by allocation methods, determine the cost of
facilities capital for a specific contract.
Sally: I thought I was on to something, but am
glad I confirmed this with you. I do have a
question about the allowability of a facilities
capital cost of their money; I remember that
allowability is something that occurs with a
Facilities Capital Cost but I am unsure of how this
works. Could you explain this for me?
Dominic: I certainly will. This was something I
was planning on covering with you during our
time this week as well.
Slide 4
Scene 4
Dominic’s office to go over
key concepts related to the
concept of Facilities Capital
Cost Of Money
Dominic: Take notice that the Facilities Cost of
Capital may be allowed as an actual incurred cost
even if the Cost Accounting Standards are not
applied to the contract. As an actual cost, it is
payable under cost-reimbursement contracts and
in the progress payments of a fixed-price contract.
Sally: That makes a lot more sense now. Aren’t
there certain provisions and clauses that should be
included in contracts too?
Dominic: Right you are! Federal acquisition
regulations require that the Facilities Capital
Cost of Money provision be inserted in all
solicitations that will result in contracts subject to
the cost principles for commercial organizations.
It notifies companies that have a facilities capital
cost of money that the cost will be an allowable
cost if the required criteria are met.
Sally: Shouldn’t the Waiver of Facilities Capital
Cost of Money clause be used in the contract if
the company did not request a facilities capital
cost of money in its proposal.
Dominic: That is correct! The clause will state
that the company did not request a Facilities
Capital Cost of Money, and therefore does not
qualify as an allowable cost.
Sally: That is quite interesting! I feel like I have a
good grasp on the concept of Facilities Capital
Cost of Money. What shall we do now?
Dominic: I’m glad to hear you feel confident with
this concept, FCCOM is quite important in our
field. You have been wonderful this week and
have exhibited a wide knowledge base in this
subject area.
Before we get ready for our weekly review, I
would like for you to go through a review activity
I have prepared to help you review some of the
concepts we covered this week.
Slide 5
Scene 5
Tab interaction that will have
audio for each tab.
Users will click each item and
be greeted with images and
narration.
Dominic: Facilities Capital Cost of Money
deals with when a contractor does work on a
government contract and the government receives
benefits from the facilities that the contractor
uses. As a result of this the Cost Accounting
Standards Board developed Cost Accounting
Standard 414, Cost of Money as an Element of
the Cost of Facilities Capital, to meet the need for
paying contractors properly for the use of their
facilities.
Dominic: Allowability of Facilities Capital Cost
of Money deals with the Facilities Cost of Capital
being allowed as an actual incurred cost even if
the Cost Accounting Standards are not applied to
the contract. As an actual cost, it is payable under
cost-reimbursement contracts and in the progress
payments of a fixed-price contract.
Dominic: Contract Provisions and Clauses
deals with the federal acquisition regulations that
require the Facilities Capital Cost of Money
provision to be inserted into all solicitations that
will result in contracts subject to the cost
principles for commercial organizations. It
notifies offers that Facilities Capital Cost of
Money will be an allowable cost if required
criteria are met.
Dominic: The Determination of the Facilities
Capital Cost of Money refers to only the actual
tangible assets or intangible assets that are subject
to amortization. Once the FCCOM value is
determined, an interest rate is then applied to the
value. The result is an imputed cost of the
Facilities Capital devoted to contract work for the
period. Then the contractor can, by allocation
methods, determine the cost of Facilities Capital
for a specific contract.
Slide 6
Check Your Understanding
Drag and Drop with key
concepts from this week’s
lesson.
Drop and drag match correct
summary:




Facilities Capital Cost of
Money
Allowability of Facilities
Capital Cost of Money
Contract Provisions and
Clauses
Determination of
FCCOM
Goes with #1- When a
contractor does work on a
government contract and the
government receives benefits
from the facilities that the
contractor uses.
Goes with #2- The facilities
cost of capital being allowed
as an actual incurred cost
even if the Cost Accounting
Standards are not applied to
the contract.
Goes with #3- Deals with the
federal acquisition regulations
that require the Facilities
Capital Cost of Money
provision to be inserted into
all solicitations that will result
in contracts subject to the cost
principles for commercial
organizations.
Goes with #4- Refers to only
the actual tangible assets or
intangible assets that are
subject to amortization. Once
the FCCOM value is
determined, an interest rate is
then applied to the value.
Slide 7
Scene 7
Conference room with
Dominic to go over the
week’s key points
Dominic: Great work on the review materials.
You did excellent and I think you really have a
solid foundation for the concepts we discussed
this week.
I would now like to summarize what we went
over this week to fill in any gaps you may have
had. Please feel free to add on to anything I say as
we go through.
Sally, do you want to begin this review?
Sally: That sounds great! I first learned that the
Facilities Cost of Capital is an imputed cost, that
is, a cost that can be inferred from the contractor’s
use of capital funds to buy the facilities. I
remember that you also went over the process for
determining the Facilities Capital Costs. That part
definitely stuck with me!
Dominic: Fantastic! I then showed you that the
Facilities Cost of Capital may be allowed as an
actual incurred cost even if the Cost Accounting
Standards are not applied to the contract. I also
told you to keep in mind that sometimes the
Facilities Cost of Capital is allowable under
certain conditions.
Sally: The last thing we talked about was the
federal acquisition regulations that require you to
insert the Facilities Capital Cost of Money
provision in all solicitations. I learned that this
will result in contracts that will be subject to the
cost principles for commercial organizations. I
recall that the Waiver of the Facilities Capital
Cost of Money clause is used in contracts like
these if the contractor did not request the
Facilities Capital Cost of Money in their proposal.
Dominic: Very good work with the review Sally.
You did really well this week with the concepts
we went over.
Sally: Thank you Dominic! This review was very
helpful and I feel that I have really grasped the
key concepts discussed this week. I feel very
confident in this content area.
Dominic: I would gladly have your assistance on
other projects; you have done a great job thus far
during your internship. I look forward to working
with you again.
Until we meet again don’t forget to complete your
weekly discussion questions based on the key
concepts we covered this week.
Have a good rest of the day and I will see you
next week!
Cost and Price Analysis
BUS 315
Facilities Capital Cost of Money
Topics
• To cover this objective, we will discuss the
following topics:
– Concept of facilities capital cost of money (FCCOM)
– Allowability of FCCOM
– Contract provisions and clauses
Concept
• Cost Accounting Standard 414
– Meets the need for paying contractors properly for the
use of their facilities
• Facilities cost of capital is an imputed cost
Allowability of Facilities Capital
Cost of Money
• Allowability of Facilities Capital Cost of Money
– The contractor’s capital investment is measured,
allocated to contracts, and costed as required by Cost
Accounting Standards
– The contractor has adequate records to show
compliance with CAS 414
– The estimated facilities capital cost of money is
specifically proposed for the contract under which it is
claimed
Contract Provisions and
Clauses
• Contract Provisions and Clauses
– FAR 52.215-16 Facilities Capital Cost of Money
(Provision)
– FAR 52.215-17 Waiver of Facilities Capital Cost of
Money (Clause)
Check Your Understanding
Summary
• Concept of facilities capital cost of money
(FCCOM)
• Allowability of FCCOM
• Contract provisions and clauses

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