Allowable costs

Allowable costs are those expenses specified in a contract that can be billed to the customer. For example, a contract to develop a customized lathe allows for the reimbursement of direct materials, direct labor, and a specific overhead charge as allowable costs. The seller cannot bill any other costs through to the customer. Thus, the nature of an allowable cost depends on the terms of the underlying contract.

Related Courses

Cost Accounting 
Project Accounting