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4.contract Costing

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Ismail Zabiulla
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43 views

4.contract Costing

Uploaded by

Ismail Zabiulla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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tit ny Sop gle leet product 4 Band c was € 15,00, € 30.000 and 5,000 Soe 10 pect. mas. ne Bscentne of alsin Band € weld be 25% an 2 rete (aa, Poston A — T3500) (24 Bonaire ‘22 S188: manufactures product A which ys tw by-product Band ¢. The actu jot eres t 4200 stm aerate Labeer Orcost ‘Sebveguent expenses are = acest mee Ovebeaae Sales 00 imate prot on ees ‘Stow how wos you apportion the jit expeues (com. Borgsiow) ete et in ee mon we 20205 22, In manufacating the main produc. » company poceses the incidental wate ite two Dy ducts ‘snd B From the following data sting tothe products you are required to pepe Coxpaaine Pet ‘24 Low Statement showing the individual cats and ote etl The ttl cts upto separation put es 3anaoo. Meingrotuct — Byprtct ype x "* A e e e sonac 64000 mao hae om om ion is aon Contract Costing Contact and Job Costing — Distncton; Contact Coxing Procedure, Spa: Contract Costing, Proft on Incomplete Contras Eaccey ies cain, Pott ‘Cause, Cost gus a Se a ae ee Ne ee mae each contract in the books of contractor to ascertain profits | @PBUeable a ‘ewan. ig and Job Costing — Distinction Main pnts of tinction between contac costing and job costing rat ‘aloe: 4. Gontat is generally big wle jb i small. is wel eid “a ob isa small contact and « contrac sa big oh” 42. The mumber of jos undertaken 2 time ar wrually age 2 compa! to mabe contacts because contacts are generally much biggrin ze 4 In contact costing mast ofthe costs are chargeable direct to contact acura ob ‘astng, rect allocation to such an exten isnot posse. “ fleaion and aporionnent of owhea cos lei contact ating compat 2 A bs ae usualy carved out in factory premises while contract wack one st ot Contract costing Conte cating usualy show the flowing fue “6 4 Gantt ae generat of tage sne an, therfore, 2 concer ely in ot a, Re! of coats ta parca pint of ne ntact generaly takes mae than one year fo complet 2 Ween cron scl tec cara mt Pi contnt undetaen is treated SA pate cont acount purl frock cnc Bos on ‘Seertain ‘oF loss on (Nate mate pec pc eu coc Sn, direct from the supplier's invoices. Any materials dawn 2, tet on the basis of materi requisition note. * Meaty at abou cost wil be dct Most expenses (eg. electricity, telephone, insurance, ete) are alo direct. 8. Speci ubrcontrctor maybe employed for ny, ect itn wig work, gag 10, Pant and equipment may be purchased forthe contactor may be hired forthe duration the contract. 131, Payments by the customer (contract) are made at various stages of completion of the contract based on architect's certificate forthe completed stage. An amount, know retention money, i withheld by the contarte as per agreed terms. ties may be incurted by the contractor for failing to complete the work within ty ‘aqred period. Costing Procedure ‘The basic procedure for costing of contracts is as fellows = 4 Contract account. Each contacts allotted a distinct umber and a separate account i opened fs each contract 2. Direct cost. Most ofthe costs of a contact can be allocated diet to the contac. Al sch zee, costs are debited to the contract arcout,Ditect cost for contacts include: () Mater Labour ant supervision, i) Duet expenses, (v) Depreition of plant and machinery, (v)Sab-contact ces, et 3. Indvect costs. Contract accounts als debited with overheads which tend tobe small in elation to direct costs. Sach cost ae often abrorbed on some arbitrary basis asa percentage on prime com, 0 ‘materials, or wages, et. Overheads ae normally restricted to head office an storage costs 44. Tranter of materiale or plant. When msteals, plant or other itone are tansferced fom the contact, the contact account is cet by that amour. '5, Contract price. The contrat arcount aio credited withthe contact pice. Honerr, when & contract snot complete atthe end ofthe financial yer, the contrat account is credited with the value of work-in-progress as on that date, 6, Profit or loss on contrac. The balance of contract account represents profit or loss which i \uansfered to Profit and Lose Account However, when contact snot completed within the nancial yx tniy pat of the profit ave ie taken into account and the remaining profs kept as reserve to me ‘ny contingent loss onthe Incomplete portion ofthe contac. This is cscusced in detail ate in ths w Spec Pit a Contract ating pe cer ri: cont of Materials ated ncde () material peal pucae forte conta () mate ome qa Date nplion sss Tan cat lbh tae pes cestode cota oe ep a ec pms tac oe ala nee fe tore compass ‘Note which gives the details of the material returned. Such returned materials are credited to conta =a ‘Materials at site. At the end of each accounting period, value of materials tying unused at stt# xn tate Sven td eed Sree po apc eek fe Cast of aboot iacaiaiiaptnn meagan arene ea eee er oie, Won ed cara magnet een a ‘normally sectionalised 40 28 to have separate payroll for each contract. Difficulties in casting mY es i ee a ten of es ‘outliers ees te eat In oe atoations ay head office personnel wil be necessary. 2... aaa eee as ree en ed seth cia hd Se cen om tte et etc epee et ee a en ea a a aera ae Ar bareate elf saat pt cts ene ey te cd sn er Res ant cis ed ea pea Me care nee aes ee ea ee ee a ee ee Eh olen NEP op a sb-contrat Costs ork of specialised character, for which faites ave not internally avaabl, i offered to ub- contrac. For example, steel work, lass work painting, et. i usually cased out bythe sb-ontaers vate accountable to the main contractor. The east of such wok is charged tothe contract ace Payment based on Architect's Certificate Incase the contract i small, fll payment is usualy made onthe completion ofthe contract. tin case of age contracts, it ay take more than one year to complete. In sucha casei no payer ‘sted until the completion of the contrat, the inanial resources of the contractor cult surly ‘ome strained. Therefore, a sytem of progess payments is agreed by partes. In this system, art ‘Ament of the contrat amount ate paid fom tine to time on the bass of certificate issued by the (acting for the contzactee), certifying the value of the work satisfactorily complete, Sich Faments received by the contractor are wsualy credited tothe personal acount ofthe contracts. It ‘olde noted that such payments are not entered in the Contract Account. _Nitkinmprogress — Work Certified and Uncertified When the contract is not completed till the end of the accounting year, the architect is equired to Sr ce of ig ee ei er ee = ee Pe ‘payment. Work certified is valued at contract price (ie , selling price), an ac ecnrareass core ee ee ss ee ese na Set de ofthe balance shee. Extra Work sonst the contactor i rege todo some extra wor Uke ations or alterations inte mag ‘eiiay don sp: agreement. The contactor wil cage eta money for such ext work. Theses smchent works tited tothe contac acount and era price male teed othe coma FIT ON INCOMPLETE CONTRACTS (6) Computation of notional profit or estimated profit. (©) Computation of the portion of such prot tobe transfered to Profit and Lass Account. Profit Notional profits the difference between the value of work-in-progress certified andthe costa such ‘work-in-progress certified. I is computed as follows (Figures are asumed); Value of work certified ‘Add: Cost of work nt yet certified t 20,0,000, 1,50,000 21,50.000, 419/0,000, 250,000 fin any year, cost of work done exceeds the value of work certified and uncertied, the result wile notional los. ‘Estimated Profit Estimated profit represents the excess ofthe contract ric over the estimated total cost of Ot ‘contract. ts computed as follows (Figures ar assumed). | Contract Price Less: Total cost already incurred Less Cast of work to date c 30,0000, 21,0000 *5,00.008 350,000, Less; Estimated additional costs to complete the contact Estimated Profit ge wk n-posresuncerted i not cnsleed. rence nga eet cote eng td iene fate expenses or continence, hae ed at er me, oy he id ee A 125.9 EON sowed (Sam Tren won proges cere es than 1/4 of he come poop stand to oft and Los Account. Tiss aed onthe pnp tht opt sane esos te Btensact has reasonably adrace BS to 44.49 2 When wipro ef /¢ororebut as than a he atc pete gee 1ysalthe pots uansfene to Pott and Ls Account. The bance amout eked ease oft tobe tanseted to Pot and Los Acounis omputed by the lonioy nas Tater to P&L A= Notional pat «4 Aarti, amore common practice iso farther rece this amount byte cash ati Z 4, oad GPL Ne Non pf} Se 2 se 2, When woe cere i 1/2 or moe but as than 9/10 othe contt pc, (50% to 9%), shethe ptt tobe transfered to P&L Acton is computed flows, Tne tPA = Notional pot «2 Hr slo amore common pact ist further efuce ths nou by eth iT shown bow ean 2 | Cash received GEE Net en 3 « Sa - 5 & sna f 20000 Contract Account forthe year 2016 ea os alse 30.000 (200,000 » 12°) By Work uct Smee an 50% of the contact pice, prot etd to FLA a (0 Wim cers 5000, a cata 2S 505. cnet pes At Pott ee Neceal pt = 1/3 = 8on Sere rs pte tL ye and te et amen of oo pt ste oe Polen 43 ow much of prot if any, you wosld conser in the following case tra price (at ica (ath eee (Adept) ete. wi ei sition s2c0n ‘TONS cntiied Unceried)— cont acu TMAA—0 + 120,00) 11,2000 = ¢ 200000 xpos ot ee ceed sy 00 6% ot pe pa tt Pe ob tated to aL Ae ed 8 follows comps otionl prot» 2/3 enh tio = 2.00000» 2/3 «90% «81200, nme pn nw aed yas Mates pune ees Mal teed ie etree e Rant uct — aes ime Feat re war. 8 wey mc stn tuner 25th indy a seen Bibra the contr etn ad ee ein Contr est rh yur tg 3 | saad occ ec By Mateo eo 2 Bet mses Tew epee Jenene (15% on 15000) 3 ra ned ——— i Note As the contot fly compete, enti prot is Uansed to a and a ut BEE wp Motte » contact fo the cnstrcton of «bing fr € 120008 be eee Conia ow Dao te a ee « = 1.20000 Machinery nae 150,000 Other expenses sam Costing Methods At the end of the yet. the machinery was valued at € 20,000 and materials 2 ste ee of th Taine of 5,000; Weck cet daring the yet totaled € 00,000 In addition work incjrpens ot arte atthe end ofthe year had cot € 15,000. Prepare Contract Account in the books of Peeenet ‘Ais show the various gues of profit that can be reasonably transfened to the PeGt mer eos Account. com, Det Contract Account forthe year ending... 6060) By Wak pomeas 150000| "caries 30.000] Uneeied S1.000} By Wace at site 52,000| By Mater te 0,00 15,00" | By Notonal Pot eft "38000 | se.00 ‘eckng ete Tarte to PEL Ae = 50,00 » wi = € 15,00 er ius hat may atemativly be taser to PL A/e maybe computed a fone 1 Notional pt «J = 0.000 = J5 = © 16,667 Work certified 490000 2 Maint wt «Gre pe * Ca ti = 80000 + APO oy, 13,00 Work cries 400 2 Naan pct » Cora price ~ 9090 * togeep; = € 20000 Pecbem 4.6 Ths BEA Construction Company undertakes large contracts, The flowing particular rate to ‘Pisa. 125 cari out during the year ended on ist March, 2016 z e Work certified by architect 143,000 Wages acrued on Stet March 2016 1.810 Cost of wok not cetiied 3400 Det expenditure 2aao Materials on hand on 3ist March 2016 1400 itera retuned to tore «00 Direct expenditure accrued on 3st Match 2016 200 Contact pice 2.00000 (ach received from contractee 230000 forthe petiod ending 3st March 2016 and find out the profit. tw ‘on cash bas to Prot and Loss Account. (ona, ars. Deli) Ee vow St Saat tae treo Slee eens cnt ae ead ee oyRat ie Shore Bien tt Dy Nae wad wratare 130,00 143,000) 151802 ehesere oblem 47 "he Inlan Costraction Co, Let. has underalen the contacton of a bidge othe He Yaa rn, The eof cet 5080 se are ne year after cetiied completion ofthe contact and al apr ote Gpeatine epee The ing we the deta shown inthe od on 308 90 t : labs on ste 405000 Matron hand on Jue 30h 2016 6300 ori ize to site 420,000 Woes acoed on Je 30, 2067.9 Merits fom stores 1,200 tec expenses acrunton Dane 3h 2016 1400 Hie and we of plant 12100 Wes not et ceed st ot 150 Diet expenses 23,000 Amount eid bythe Coron’ Geer orehead allocated tothe coger gon contact 37300 cashed on scout soo Prepare (2) Contract Account, race's Account, and () show how it wold agparin the aah BPae (a) Account, (b) Ca (atom, sit) crs Solution: ‘Account forthe year ending 30th June, 2016 Parlrs : 420000) By Materials on hand 35 81,200] By Work n-pope 405,00] ” owed 1.090% 2100] certified 1se0 37230] ot certified Tit Dec, 2016 Bed ist Dee. 26 te accrued 3st Dc, 206 ry a 0 on ts eg eR concen Tet font 4 on wn eam arent en CK ee oe ee wa sm Ei Contract‘ Account for the year ending 3st Dec, 2016 eros XS) By leis Gamal aay 76375] By Mater hand 15.00| By Pam in aed JAS) 8 Wake pores: ‘ia6] Wa ete 2400] Wak Sewtet 2325 2a 400" | By Neonat Pte b/d {M5 Moponon of prot transened to Pott and Los Aunt has ben cated by he om 2 Cah esid ed ao TRS -csco 2 w 2821s} Account De. 3, 2016 By ch oun 206 ay aac year ending 31st Dee, 2016 [ ‘ad Sind ‘nt a i ee le eset (ERE. eg eaarat ane "| Contract Account forthe year ending Sst —— fae Soc eraa Same Rast onde, 2016 sent exPETSCS ‘etka Pogess = 2s on pat Mestad 420009 $500 | Mant ts epson ST — Docs fees " Wk werriet “23.000 ‘Hee es Bigoere ltnal Pt) = — Si ca se SPA oem) Ra | cut mais a —— | ace Contract Acoant forthe Won temnites “4S ao ae |e a, Siete Elke epee a Ge ane” PS AaB sing the yeas The flovng pats | PRESENT ee be yearend (Bet 35) ‘bein os fant Contact & Contract 8 aie es commencement September 1 : z oc Some pi s.00 000 ‘A contacter’ east a ‘o000 e ——— 2000 eg Dims boar 2000 7 sen. By ae Bie expres 3500 — —— 2000 2 Contractor's Acoatt 10,000 e000 3 i 10.000 zso00| 3 Dee ay at 1.35000 a2 By Bate 128,000 ae 11000 seman i Stutiog to € $200 have been tansfered fom contact A tet shanas0 stow (a) Contact Accounts, (8) Contncteey Acer asd oS pest stom December Sit, cently shoving the ledation of Sakon pe (6M, Banagale) ea asl Contract eat fr he dag nach sng Ss coco onear ca vot Cnet Croat at oa

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