The academics were used to use AC cost model during FP6. Is it optional to use FC model or transition derogation during FP7?

It is not meant to be an option.

If you have an accounting system that allows you to work out your actual overheads and allocation of direct costs per project, then you have to use your actual overheads or 20% flatrate.

If you have no method in place then you can use the derogation 60% flatrate.