A cost is allowable only when it meets which of the following criteria?

A cost is considered allowable when it meets specific criteria set forth in government contracting regulations. The correct response highlights three essential criteria: reasonable, allocable, and allowable.

Reasonable costs are those that would not exceed what a prudent person would incur in the conduct of competitive business. This ensures that the costs charged to a contract were necessary and reflect market conditions.

Allocable costs refer to those that can be clearly assigned to specific contracts based on the benefit derived, ensuring that the cost is proportionately spread among various projects or contracts to reflect actual usage accurately.

Allowable costs are defined by the regulations governing the contract, indicating that they must comply with the terms set by the government or funding agency, as well as all relevant laws and regulations.

These three criteria work together to ensure that costs charged to government contracts are fair, justified, and directly linked to the contract performance, maintaining transparency and accountability in contracting processes.