JOB, BATCH, CONTRACT COSTING

SECTION A

1. A Choose the correct answer from given four alternatives [one mark each]

A. Which of the following costing methods is most likely to be used by a company involved in the construction
of hotels?
a. Batch costing
b. Contract costing
c. Job costing
d. Process costing

B. Which of the following item is not contained in a typical job cost?

a. Actual material cost
b. Actual manufacturing overheads
c. Absorbed manufacturing overheads
d. Actual labour cost

C. Which of the following is a feature of job costing?

a. Production is carried out in accordance with the wishes of the customer
b. Associated with continuous production of large volumes of low-cost items
c. Establishes the cost of services rendered
d. Costs are charged over the units produced in the period

D. Which of the following statements is/are correct?

(i) A materials requisition note is used to record the issue of direct material to a specific job
(ii) A typical job cost will contain actual costs for material, labour and production overheads, and non-
106 Questions production overheads are often added as a percentage of total production cost
(iii) The job costing method can be applied in costing batches
a. (i) only
b. (i) and (ii) only
c. (i) and (iii) only
d. (ii) and (iii) only

E. A job is budgeted to require 3,300 productive hours after incurring 25% idle time. If the total labour cost
budgeted for the job is Rs 36,300, what is the labour cost per hour? 108
a. Rs 8.25
b. Rs 8.80
c. Rs 11.00
d. Rs 14.67

F. The main points of distinction between job and contract costing includes
a. Length of time to complete
b. Big jobs
c. Activities to be done outside the factory area
d. All of the above

G. Which of the following would best describe the characteristics of contract costing:
i. homogeneous products;
ii. customer driven production;
iii. short period of time between the commencement and completion of the cost unit
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 a. (i) and (ii) only
b. (ii) and (iii) only
c. (i) and (iii) only
d. (ii) only

H. Which of the following statements about contract costing are correct?

i. Work is undertaken to customers' special requirements
ii. Work is usually undertaken on the contractor's premises
iii. Work is usually of a relatively long duration
a. (i) and (ii) only
b. (i) and (iii) only
c. (ii) and (iii) only
d. All of them

I. Assignment number 652 took 86 hours of a senior consultant's time and 220 hours of junior time. What
price should be charged for assignment number 652? The following information is also given;
Overhead absorption rate per consulting hour Rs12.50
Salary cost per consulting hour (senior) Rs20.00
Salary cost per consulting hour (junior) Rs 15.00
The firm adds 40% to total cost to arrive at a selling price
a. Rs 7028
b. Rs 8845
c. Rs 12383
d. Rs 14742
J. Contract number 145 commenced on 1st March and plant from central stores was delivered to the site.
The book value of the plant delivered was Rs 420,000. On 1 July further plant was delivered with a book
value of Rs 30,000. Company policy is to depreciate all plant at a rate of 20% of the book value each
year.
The depreciation to be charged to contract number 145 for the year ending 31 December is;
a. Rs 37000
b. Rs 57000
c. Rs 73000
d. Rs 89000

B. Match the following [one mark each]

Basically is of the same character as the job order production, the difference being
A Specific order costing a
mainly one in the size of different orders.
A clause in a contract which empowers a contractor to revise the price of the
B Stores requisition b contract in case of increase in the prices of inputs due to some macro-economic or
other agreed reasons.
Each Batch is treated as a cost unit and costs are accumulated and ascertained
C Batch production c
separately for each batch
The optimum quantity of batch which should be produced at a point of time
D cost -plus contract d
determined after achieving a tradeoff between set up costs and carrying costs
E Escalation Clause e Is applied to jobs using a predetermined factory overhead absorption rate.

F Batch Costing f the work-in-progress is usually shown under two heads, viz. certified and uncertified
A clause in a contract which empowers a contractor to revise the price of the
Economic Batch
G g contract in case of decrease in the prices so that the benefit may be passed on to the
Quantity
contractee.

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 H Factory overhead h helps segregation of material cost by jobs or work order for each particular job
De-escalation
I i includes job costing consisting batch costing and contract costing
/Reverse Clause
In the Balance Sheet A contract where the value of the contract is determined by adding an agreed
J j
of the contractor percentage of profit to the total cost.

C. State whether the following statements are True' or 'False': [one mark each]
a. Job costing is also known as specific order costing, production order costing, and lot costing
b. Contract Costing which is also known as Terminal Costing is a variant of the job costing system
c. Cost of such rectification for defective work should not be charged to the Contract Account but shown separately
d. Sub-contracting is necessary for work of a specialized nature for which facilities are not internally available within
the concern.
e. In Contract Accounts, the value of the work-in-progress consists of the cost of work completed, both certified and
uncertified and the cost of work not yet complete.

D. Fill in the blanks: [one mark each]

a. _______________ is applicable to engineering concerns, construction companies, ship-building, furniture
making, hardware and machine manufacturing industries, repair shops, automobile garages and several
such other industries.
b. While job-costing systems assign costs to distinct units of a product or service__________________ assign
costs to masses of identical or similar units and compute unit costs on an average basis. Thus these two
costing systems represent opposite ends of a continuum.
c. Job costing is similar to that under Batch costing except with the difference that a __________________________
d. ______________________ and _________________ are examples of industries where batch costing is applied.
e. In order for job costs to be available on a timely basis, it is customary to apply factory overhead by using
a ________________

SECTION B: Answers any five Questions

[Working notes should form part of the answer]

2. Answer both the questions

a. AL Company operates a job costing system. The company's standard net profit margin is 20 per cent
of sales value.
The estimated costs for job B124 are as follows.
Direct materials 3 kg @ Rs 5 per kg
Direct labour 4 hours @ Rs 9 per hour
Production overheads are budgeted to be Rs 240,000 for the period, to be recovered on the basis of
a total of 30,000 labour hours. Other overheads, related to selling, distribution and administration,
are budgeted to be Rs 150,000 for the period. They are to be recovered on the basis of the total
budgeted production cost of Rs 750,000 for the period.
Calculate the price to be quoted for the job B 124

b. A firm makes special assemblies to customers' orders and uses job costing.
The data for a particular period are;
Job Number Job Number Job number
Particulars
AA10 (Rs) BB15 (Rs) CC20 (Rs)
Opening work in progress 26800 42790 0
Material added in period 17275 0 18500
Labour for period 14500 3500 24600
The budgeted overheads for the period were Rs 126000.

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 i.Calculate the overhead to be added to job number CC20 for the period?
ii.Job number BB15 was completed and delivered during the period and the firm wishes to earn 33%
profit on sales. What is the selling price of job number BB15?
iii.What was the approximate value of closing work-in-progress at the end of the period?
[8 +7 =15]
3. Answer all questions
a. A company calculates the prices of jobs by adding overheads to the prime cost and adding 30% to total
costs as a profit margin. Job number Y256 was sold for Rs 1,690 and incurred overheads of Rs 694. What
was the prime cost of the job?

b. Contract number 789 obtained some plant and loose tools from central stores on 1 January year 3. The
book values of the plant and tools at that date were Rs 380,000 and Rs 4,000 respectively. On 30 June year
3 some plant was removed from the contract site. The written down value of this plant at that date was Rs
120,000. On 31 December year 3 the plant and tools remaining on site had written down values of Rs
180,000 and Rs 2,500 respectively.
Calculate the depreciation cost of the equipment to be charged to contract 789 for year 3

c. A road building company has the following data concerning one of its contracts.

Rs
Contract Price 11200000
Cost of Work Certified to date 3763200
Estimated cost to completion 2956800
[No difficulties are foreseen on the
contract
Calculate the profit to be recognised on the contract to date

d. A construction company has the following data concerning one of its contracts.

Rs
Contract price 400,000
Value certified to date 18,000
Cash received to date 16,200
Costs incurred to date 10,800
Cost of work certified to date 9,900
Calculate the profit to be recognised on the contract to date.
[4 ½ + 4 ½ + 3+3 =15]

4. Answer both the questions

(a) Thunderbird use a job-order cost system and applies factory overhead to production orders on the basis
of direct labour costs. The overhead rates for 2017 are 200 per cent for Department A and 50 per cent for
Department B. Job 123, started and completed during 2017, were charged with the following costs:

(figures in Rs)
Department Department
A B
Direct Material 25000 5000
Direct Labour x 30000
Factory Overhead 40000 y
Determine the total manufacturing costs assigned to Job 123

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4 (b) Particulars Rs
Materials purchased 6,00,000
Material drawn from stores 1,00,000
Wages 2,25,000
Plant issued 75,000
Chargeable expenses 75,000
Apportioned indirect expenses 25,000
The contract was for Rs 20, 00,000 and it commenced on January 1, 2017. The value of the work
completed and certified upto 31st December, 2017 was Rs 13, 00,000 of which Rs 10, 40,000 was
received in cash, the balance being held back as retention money by the contractee. The value of
work completed subsequent to the architect’s certificate but before 31st December, 2017 was Rs
60,000. There were also lying on the site materials of the value of Rs 40,000. It was estimated that
the value of plant as at 31st December, 2017 was Rs 30,000.
You are required to compute value of work certified, cost of work not certified and notional
profit on the contract till the year ended 31st December, 2017.

5. (a) Camp Company uses a job-order costing system. The company has two departments through which most
jobs pass. Selected budgeted and actual data for the past year follow:
Department Department
A B
Budgeted Overhead Rs 100000 Rs 500000
Actual Overhead Rs 110000 Rs 520000
Expected activity (Direct Labour hours) 50000 10000
Expected Machine hours 10000 50000
Actual Direct Labour hours 51000 9000
Actual Machine hours 10500 52000
During the year, several jobs were completed. Data pertaining to one such job follows:

Particulars Job 310

Direct Materials Rs 20000
Direct Labour Cost:
Department A (5000 hours @ Rs 6) Rs 30000
Department B (1000 hours @ Rs 6) Rs 6000
Machine Hours Used:
Department A 100
Department B 1200
Units Produced 10000

Camp Company uses a plant-wide predetermined overhead rate to assign overhead to jobs. Direct labor
hours (DLH) is used to compute the predetermined overhead rate.
Compute the predetermined overhead rate.
i. Compute the predetermined overhead rate.
ii. Using the predetermined rate, compute the per-unit manufacturing cost of Job 310.
iii. Recalculate the unit manufacturing cost for Job310 using departmental overhead rates.
Use direct labour hours for Department A and machine hours for Department B.

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5. (b) Dakuti Ltd.is committed to supply 24,000 bearings per annum to Mosaki Ltd. On a steady basis. It is
estimated that it costs 10 paise as inventory holding cost per bearing per month and that the set-up cost per
run of bearing manufacture is Rs 324.
i. What would be the optimum run size for bearing manufacture?
ii. What is the minimum inventory holding cost at optimum run size?
iii. Assuming that the company has a policy of manufacturing 6000 bearing per run, how much
extra cost would the company be incurring as compared to the optimum run suggested in (i)?

[9+6 =15]

6. (a) A contractor prepares his accounts for the year ending 31st December each year. He commenced a
contract on 1st April, 2017.
The following information relates to the contract as on 31st December, 2017:

Particulars Rs
Material issued 2,51,000
Wages 5,65,600
Salary to Foreman 81,300
A machine costing Rs 2,60,000 has been on the site for 146 days, its working life is estimated at 7
years and its final scrap value at Rs 15,000. A supervisor, who is paid Rs 8,000 p.m. has devoted one-half of
his time to this contract.
All other expenses and administration charges amount to Rs 1,36,500.
Material in hand at site costs Rs 35,400 on 31st December, 2017.
The contract price is Rs 20,00,000. On 31st December, 2017 two-third of the contract was completed. The
architect issued certificates covering 50% of the contract price, and the contractor had been paid Rs
7,50,000 on account.
Prepare Contract A/c and show the notional profit or loss as on 31st December, 20X1.

6. (b) From the following calculate the Notional profit. How much of the notional profit should be transferred to
Costing P/L Account
Contract price 2,000,000
Value of work certified 1,300,000
Cash received 1,200,000
Costs incurred till date 1,050,000
Cost of work certified 1,000,000
[10 +5 = 15]

7. (a) A contractor has entered into a long term contract at an agreed price of Rs 17,50,000 subject to an
escalation clause for materials and wages as spelt out in the contract and subsequently the actuals are found
out to be as follows :

Standard Actual
Materials Qty. (tons) Rate (Rs) Qty. (tons) Rate (Rs)
A 5000 50 5050 48
B 3500 80 3450 79
C 2500 60 2600 66
Hourly Rate Hourly Rate
Wages Hours (Rs) Hours (Rs)
X 2000 70 2100 72
Y 2500 75 2450 75
Z 3000 65 3100 66

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 Reckoning the full actual consumption of material and wages the company has claimed a final price of
Rs 17, 73, 600. Give your analysis of admissible escalation claim and indicate the final price payable. Also
state the reasons on justification of the given answer.

7. (b) The following data relates to contract A520.

Particulars Rs
Contract price 86,250
Value of work Certified 57,900
Cash received 54,000
Cost of Work Certified 65,625
Cost to be incurred to complete contract 29,375
Calculate the total cost of sales and value of work certified.
[10+ 5 = 15]

8. Rupayan Realty Ltd. commenced a contract of construction of a flat named Sucasa Woods on
April 1, 2016. The total contract was for Rs 49, 21,875. It was decided to estimate the total profit
on the contract and to take to the credit of Costing Profit and Loss Account that proportion of
estimated profit on cash basis, which work completed bore to total contract. Actual expenditure
for the period April 1, 2016 to March 31, 2017 and estimated expenditure for April 1, 2017 to
September 30, 2017 are given below :

April 2016 to April 1, 2017 to

Particulars March 2017 Sept 30 2017
Actual (Rs) Estimated (Rs)
Materials issued 776250 1299375
Wages: Paid 517500 618750
Prepaid 37500 -
Outstanding 12500 5750
Plant purchased 400000 -
Expenses: Paid 225000 375000
Outstanding 25000 10000
Prepaid 15000 -
100000 (on 300000(on
Plant returned to store September 30 September 30
(historical cost) 2016) 2017)
Work Certified 2250000 Full
Work Uncertified 25000 -
Cash Received 1875000 -
Material at site 82500 42500
The plant is subject to annual depreciation @ 25% on written down value method. The contract is
likely to be completed on September 30, 2017.
Required: Prepare the Contract A/c for the year ended 31st March, 2017 and determine
the estimated profit on the contract till the completion of the contract.

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ANSWERS

Answer 1 A
A B C D E F G H I J
b b a c a d d c c c
Answer 1 B

A B C D E F G H I J
i h a j b c d e g f

Answer 1C T, T, F, T, F

Answer 1D
i. Job Order Costing
ii. Process Costing system
iii. Job becomes a cost unit
iv. Toys Manufacturing Industries, Tyre and Tubes Manufacturing Industries, Read made Garments
Manufacturing Industries, Pharmaceutical/ Drug Industries, Spare parts and Components Manufacturing
Industries (any two).
v. Predetermined factory overhead rate

Answer 2 (a)
Production overhead absorption rate = Rs 240,000/30,000 = Rs 8 per labour hour
Other overhead absorption rate = (Rs 150,000/Rs 750,000) × 100% = 20% of total production cost

Direct materials 3 kgs * 5 15.00

Direct labour 4 hours * 9 36.00
Production Overhead 4 hours * 8 32.00
83.00
Other overhead 20% * 83 16.60
Total Cost 99.60
Profit Margin (20% of Sales) 20/80 24.90
Price to be quoted 124.50

Answer 2 (b)
i. The most logical basis for absorbing the overhead job costs is to use a percentage of direct labour cost.
Overhead (absorbed on the basis of direct labour hours)
= 24600/(14500 + 3500 + 24600) × 126000 = 72761
If materials cost is used as the basis for overhead absorption, would give erroneous result as this would not
be equitable because job number BB15 incurred no material cost and would therefore absorb no overhead.
If Prime cost (material plus labour) is used as the basis for overhead absorption the same disadvantage
would arise. Thus it is best to use direct labour hour as the basis for overhead absorption

ii. Calculation of Selling Price to be quoted for Job BB15

particulars Rs
Opening WIP 42790
Labour for the period 3500
Overheads (3500/42600) × 126000 10352
Total Cost 56642

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 Profit (33 1/3 on sales = 50% on Cost) 28321
84963

iii. Calculation of Closing WIP (Considering point ii which states that Job BB 15 has been delivered).
Job Number Workings WIP (Rs)
AA 10 (26800 + 17275 + 14500) + (14500/42600) × 126000 101462
CC 20 (18500 + 24600 + 72761 [as calculated in ii]) 115861
Total closing WIP 217323

Answer 3(a)
Prime Cost + Overhead = TC (Total Cost) + P (Profit) = SP (Sale price)
⇒ Prime Cost + Overhead = TC + 0.3 × TC = SP (1690)
⇒ Prime Cost + Overhead = 1.3 TC = SP (1690)
⇒ Prime Cost + 694 = 1.3 TC = 1690
⇒ Prime Cost = 606
Answer 3 (b)

Particulars Rs Rs

Equipment delivered to site (January 1)

Plant 380000
Tools 4000 384000
Plant transferred from site (June 30) -120000
Equipment at site (December 31)
Plant -180000
Tools -2500 -182500
Depreciation of Equipment (Year 3) 81500

Answer 3(c)
Total contract cost, to completion = Rs 3763200 + Rs 2956800 = Rs 6720000
Approximate degree of completion = (3763200 ÷ 6720000) × 100 =
Since the contract is 56% complete and no difficulties are foreseen, a profit can reasonably be taken.
Profit to be taken = 56% × final contract profit = 56% × (11200000 – 6720000) = 2508800

Answer 3 (d)
Since the contract is in its early stages, no profit should be recognised. Profit should only be taken when the
outcome of the contract can be assessed with reasonable accuracy.

Answer 4 (a)

Department Department Total

Direct Material A 25000 B 5000 30000
Direct Labour 20000 30000 50000
Factory Overhead 40000 15000 55000
85000 50000 135000
w/n 1
factory overhead is 200 per cent of labour

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 therefore for department A, Direct labour (x) is half of factory overhead
x = 40000 × 1/2 = 20000
and for department B, factory overhead is 50 per cent of Direct Labour,
therefore for department B, factory overhead (y) is half of direct labour
y = 30000 × 1/2 = 15000

Answer 4 (b)

Particulars (Rs) Particulars (Rs)

To Material purchased 600000 By Work-in-progress:
To Stores issued 100000 Value of work certified 1300000
To Wages 225000 Cost of work uncertified 60000
To Plant 75000 By Material unused 40000
To Chargeable expenses 75000 By Plant less depreciation 30000
To Indirect expenses 25000
To Costing P&L A/c 330000
(Notional profit) (bal.figure)
1430000 1430000

An alternative method of presentation can be to deduct the balance of profit to be carried down (Rs
1,54,000 in the above case) from the work certified before it is entered in the contract account. It will be Rs
11,46,000 in the solution. Of course, the reserve to be so deducted from the work certified will have to be
first ascertained by considering the value of the work certified.

Answer 5 (a)
i. Predetermined overhead rate = Rs 600000/60000= Rs 10 per DLH. Add the budgeted overhead for
the two departments and divide by the total expected direct labour hours (DLH = 50000 + 10000).
ii.
(figures in Rs)
Particulars Job 310
Direct Materials 20000
Direct Labour Cost 36000
Overhead (Rs 10 × 6000 DLH) 60000
116000
Units Cost (Rs 116000 ÷ 10000) 11.6

iii. Predetermined rate for Department A: Rs 100,000/50,000= Rs 2 per DLH. Predetermined rate for
Department B: Rs 500,000/50,000= Rs 10 per machine hour.
(figures in Rs)
Particulars Job 310
Direct Materials 20000
Direct Labour Cost 36000
Overhead :
Department A: Rs 2 × 5000 10000
Department B: Rs 10 × 1200 12000
78000
Units Cost (Rs 78000 ÷ 10000) 7.8

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 Overhead assignment using departmental rates is more accurate because there is a higher
correlation with the overhead assigned and the overhead consumed. Notice that Job 310 spends
most of its time in Department A, the least overhead-intensive of the two departments.
Departmental rates reflect this differential time and consumption better than plant-wide rates do.

Answer 5 (b) (i)

2AS
Optimum Production Run Size (Q) = √
C
A = No. of units to be produced within a year
O = Set-up cost per production run
C= Carrying Cost per unit per annum
2×24000×324
Optimum Production Run Size (Q) = √ = 3600 Units
0.10×12
ii. Minimum inventory Holding Cost, if run size is 3600 bearings
= Average inventory × carrying cost per unit
= (3600/2) x (0.10 x 12) = Rs 2160
iii. Statement showing Total Cost at Production Run sizes of 3600 and 6000 bearings
run size run size
Particulars 3600 units of 6000
(optimum) units
a Annual Requirement 24000 24000
b Run Size 3600 3600
c No of Runs (a ÷ b) 6.667 4.00
d Set up cost per run 324 324
e Total set up cost (c × d) 2160 1296
f Average Inventory (b ÷ 2) 1800 3000
g carrying cost per unit p.a. 1.20 1.20
h Total Carrying cost (f × g) 2160 3600
i Total Cost (e + h) 4320 4896

Extra cost incurred, if run size is of 6000 = Rs 4896 – Rs 4320 = Rs 576

Answer 6 (a)

Contract Account
Particulars Rs Particulars Rs
To Material issued 251000 By Machine(Working note i) 246000
” Wages 565600 ” Material (in hand) 35400
” Foreman’s salary 81300 ” Cost C/d (balancing figure) 1049000
” Machine 260000
Supervisor’s salary
” (` 8,000 × 9)/2 36000
” Administrative charges 136500
1330400 1330400
” Cost b/d 1049000 ” Value of work certified 1000000
Costing P&L A/c (Notional Cost of work uncertified
” profit) 213250 ” (Working Note ii) 262250
1262250 1262250
Working Note

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 260000−15000 146 𝑑𝑎𝑦𝑠
i. × = Rs 14000
7 𝑦𝑒𝑎𝑟𝑠 365 𝑑𝑎𝑦𝑠
Hence value of machine at site on 31 December = 260000 -14000 = 246000
ii. Cost of work uncertified
Cost of 2/3rd work = 1049000 (as calculated)
Therefore, cost of total work = 1049000 × 3/2 = 1573500
Given that 50% work has been certified ⇒ 50% work is uncertified ⇒ 50% of 1573500 =
786750. Of which 2/3 has been ⇒ 1/3 work is not certified = 1/3 × 786750 = 262250.
Answer 6 (b)
Notional profit = Value of work certified to date – the cost of the work certified
Notional profit = Rs (1,300,000 – 1,000,000)
Notional profit = Rs 300,000

2/3rd of the notional profit should be transferred to the Costing Profit and Loss Account since more than
50% of the Contract has been completed.

Answer 7 (a) Statement showing final claim

Standard Standard Actual Rate Variation in Escalation
Qty./Hrs. Rate (Rs) (Rs) Rate (Rs) Claim (Rs)
(a) (b) (c) (d) = (c)–(b) (e) =(a) × (d)
Materials
A 5000 50 48 (–) 2.00 (–) 10,000
B 3500 80 79 (–) 1.00 (–) 3,500
C 2500 60 66 (+) 6.00 15000
Materials escalation claim: (A) 1500
Wages
X 2000 70 72 (+) 2.00 4000
Y 2500 75 75 — —
Z 3000 65 66 (+) 1.00 3000
Wages escalation claim: (B) 7000
Final claim: (A + B) 8500

Statement showing Final Price of Contract

[with Escalation]
Particulars Rs Rs
Agreed price 17,50,000
Agreed escalation :
Material cost 1,500
Labour cost 7,000 8,500
Final price payable 17,58,500

The claim of Rs 1773600 is not admissible because escalation clause covers only that part of
increase in cost, which has been caused by inflation.
Increase or decrease of quantity of material labour hours (actual) is not a matter for which contractor
can claim ‘Escalation’ and thus the same is to be excluded from the calculation.
It is fundamental principle that the contractee would compensate the contractor for the increase in costs
which are caused by factors beyond the control of contractor and not for increase in costs which are
caused due to inefficiency or wrong estimation.

Cost Accounting Workbook [Paper - 8]/ Syllabus 2016 Page 12

Answer 7 (b)
The contract is forecast to make a loss and the total expected loss should be taken into account assoon as it is
recognised.
Particulars Rs
Value of work certified (till date) 57900
Less Cost of wok certified (till date) 65625
Loss incurred on contract (till date) (7725)

Particulars Rs Rs
Total Contract Price 86250
Less : Total Cost of the Contract
Cost of wok certified (till date) 65625
Add: Cost to be incurred 29375 95000
Total loss on the contract 8750
Expected future loss (8750 – 7725) 1025
Thus, Total Cost of sales = Cost incurred till date + Expected future loss
= 65625 + 1025 = 66650
And value of the work certified Rs 57,900.
Therefore notional profit = loss to be taken to profit and loss account
= (57900 – 66650) = 8750 (which is the total loss on the contract)
Answer 8
Contract Account (01.04.2016 to 31.03.2017)
Particulars Rs Rs Particulars Rs Rs
By Plant returned to store on
To Material issued 776250 30.09.2016 100000
To Wages 517500 Less depreciation [w/n 1] -12500 87500
Less: Prepaid -37500
Add: Outstanding 12500 492500 By Plant at site on 31.03.2017 300000
To Plant purchased 400000 Less depreciation [w/n 2] -75000 225000
To Expenses 225000 By Materials at Site c/d 82500
Less: Prepaid -15000 By Work-in-Progress c/d
Add: Outstanding 25000 235000 Work certified 2250000
Work uncertified 25000
To Notional Profit 766250
2670000 2670000

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 Computation of Estimated Profit
Contract A/c (01.4.2017 to 30.9.2017)
Particulars Rs Particulars Rs
To Material issued By Material at Site
2075625
(776250 +1299375) 42500
To Wages (492500+ By Plant returned to
618750 +37500-12500+ 1142000 store on 30.09.2016
5750) (100000 - 12500) 87500
By Plant returned to
store on 30.09.2017
To Plant purchased 400000
(400000 - 100000 -
103125) 196875
To Expenses (235000 +
375000 -25000+ 15000 610000
+10000)
By Contractee A/c
4921875
To Estimated Profit 1021125

5248750 5248750

Workings: [w/n 1,w/n 2,w/n 3]

Calculation of Written down Value of Plant on 30.09.2017
Particulars Rs
Plant Purchased on 01.04.2016 400000
Less: Plant returned to store on 30-9-2016
(Rs 100000 × 25/100 × 6/12 -- w/n1) 100000
300000
Less: Depreciation on Balance of the Plant (300000 × 25/100) -- w/n 2 75000
W.D.V of Plant on 01.04.2017 225000
Less: depreciation for the year 01.04.2017 to 30.09.2017 (225000 ×
25/100 × 6/12) - w/n 3 28125
Calculation of Written down Value of Plant on 30.09.2017 196875

Cost Accounting Workbook [Paper - 8]/ Syllabus 2016 Page 14