With the full cost recovery principle prices should

with the full cost recovery principle, prices should include all of the costs involved in
providing goods and services, including both direct and indirect (overhead) costs.
Activity Based Costing is often used to determine the full costs.
The primary purposes for DoD working capital funds are to:
o Finance supply inventories as designated by the Secretary of Defense.
o Provide working capital for industrial-type activities and commercial-
type activities that provide common services within DoD.
Stabilized Rates. Working capital fund activity groups' prices are established through
the budget process, and except for Depot Maintenance and Central Design Agent
Activity Groups, remain fixed during the year of execution. The rates for supply items
managed by working capital funds are usually based on the anticipated item costs
plus a surcharge. Unit cost rates for services provided by working capital fund
activities are based on identified output or other measures.
Recovery or return of gains and losses. Gains or losses in a particular budget year are
corrected via adjustment to the next year's stabilized rate. Operating losses and
gains of $10 million or more in the Depot Maintenance and Central Design Agent
activity groups are recouped or returned in the current fiscal year.

History of Working Capital Funds. DoD's present working capital funds evolved from
various stock and industrial funds that were combined into the Defense Business
Operations Fund (DBOF) in 1991. The five current working capital funds (Army, Air
Force, Navy, Defense-wide, and Defense Commissary Agency) were established in
1996 and 1997 from the DBOF reorganization.