48 CFR § 9904.407-40 - 9904.407-40 Fundamental requirement.

---
identifier: "/us/cfr/t48/s9904.407-40"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "48 CFR § 9904.407-40 - 9904.407-40   Fundamental requirement."
title_number: 48
title_name: "Federal Acquisition Regulations System"
section_number: "9904.407-40"
section_name: "9904.407-40   Fundamental requirement."
chapter_number: 99
chapter_name: "COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET"
subchapter_number: "B"
subchapter_name: "PROCUREMENT PRACTICES AND COST ACCOUNTING STANDARDS"
part_number: "9904"
part_name: "COST ACCOUNTING STANDARDS"
positive_law: false
currency: "2026-03-24"
last_updated: "2026-03-24"
format_version: "1.1.0"
generator: "[email protected]"
authority: "Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422."
regulatory_source: "57 FR 14153, Apr. 17, 1992, unless otherwise noted."
cfr_part: "9904"
---


# 9904.407-40 9904.407-40   Fundamental requirement.

Standard costs may be used for estimating, accumulating, and reporting costs of direct material and direct labor only when all of the following criteria are met:

(a) Standard costs are entered into the books of account.

(b) Standard costs and related variances are appropriately accounted for at the level of the production unit.

(c) Practices with respect to the setting and revising of standards, use of standard costs, and disposition of variances are stated in writing and are consistently followed.