# 2 CFR § 200.404: Reasonable costs

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/ecfr-2-200.404

## Section

- **Citation:** 2 CFR § 200.404
- **Heading:** Reasonable costs
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** September 22, 2026
- **Source:** Publisher's official text
- **Location:** Title 2—Federal Financial Assistance > Subtitle A—Office of Management and Budget Guidance for Federal Financial Assistance > CHAPTER II—OFFICE OF MANAGEMENT AND BUDGET GUIDANCE > PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS > Subpart E—Cost Principles > Basic Considerations

## Text

A cost is reasonable if it does not exceed an amount that a prudent person would incur under the circumstances prevailing when the decision was made to incur the cost. In determining the reasonableness of a given cost, consideration must be given to the following:
(a) Whether the cost is generally recognized as ordinary and necessary for the recipient's or subrecipient's operation or the proper and efficient performance of the Federal award;
(b) The restraints or requirements imposed by such factors as sound business practices; arm's-length bargaining; Federal, State, local, tribal, and other laws and regulations; and terms and conditions of the Federal award;
(c) Market prices for comparable costs for the geographic area;
(d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the recipient or subrecipient, its employees, its students or membership (if applicable), the public at large, and the Federal Government; and
(e) Whether the cost represents a deviation from the recipient's or subrecipient's established written policies and procedures for incurring costs.

## Nearby sections

- [2 CFR § 200.400 § 200.400 Policy guide.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.400.md)
- [2 CFR § 200.401 § 200.401 Application.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.401.md)
- [2 CFR § 200.402 § 200.402 Composition of costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.402.md)
- [2 CFR § 200.403 § 200.403 Factors affecting allowability of costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.403.md)
- [2 CFR § 200.404 § 200.404 Reasonable costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.404.md)
- [2 CFR § 200.405 § 200.405 Allocable costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.405.md)
- [2 CFR § 200.406 § 200.406 Applicable credits.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.406.md)
- [2 CFR § 200.407 § 200.407 Prior written approval (prior approval).](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.407.md)
- [2 CFR § 200.408 § 200.408 Limitation on allowance of costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.408.md)
- [2 CFR § 200.409 § 200.409 Special considerations.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.409.md)
- [2 CFR § 200.410 § 200.410 Collection of unallowable costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.410.md)
- [2 CFR § 200.411 § 200.411 Adjustment of previously negotiated indirect cost rates containing unallowable costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.411.md)
- [2 CFR § 200.412 § 200.412 Classification of costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.412.md)
- [2 CFR § 200.413 § 200.413 Direct costs.](https://www.frixlaw.com/law-library/statutes/ecfr-2-200.413.md)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/ecfr-2-200.404. Check the current official text before relying on it. Not legal advice.