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Contract Costing

The document contains 4 contract costing problems. The first problem provides information about a contract undertaken by Brick Constructions Ltd from April 1, 2020 to March 31, 2021 including the contract price, work completed and certified, retention amount, subsequent work completed, expenses incurred, and materials on site. The second problem provides multi-year information for a contract undertaken by Bhagwandas from 2004 to 2006 including expenditures, work certified, cash received, and completion of the contract. The third problem provides expenditure and other information as of March 31, 2012 for a contract commenced on July 1, 2011 including materials, labor, plant, administration expenses, materials on hand, work completed, and cash received. The fourth problem provides similar information for

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86 views4 pages

Contract Costing

The document contains 4 contract costing problems. The first problem provides information about a contract undertaken by Brick Constructions Ltd from April 1, 2020 to March 31, 2021 including the contract price, work completed and certified, retention amount, subsequent work completed, expenses incurred, and materials on site. The second problem provides multi-year information for a contract undertaken by Bhagwandas from 2004 to 2006 including expenditures, work certified, cash received, and completion of the contract. The third problem provides expenditure and other information as of March 31, 2012 for a contract commenced on July 1, 2011 including materials, labor, plant, administration expenses, materials on hand, work completed, and cash received. The fourth problem provides similar information for

Uploaded by

hugebtsarmy0108
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CMA PRIYADHARSHINI Contact no: 9840876583

CONTRACT COSTING

1) Brick constructions Ltd. commenced a contract on April 1, 2020. The


contract was for ₹ 10,00,000. The following information related to the
contract as on 31st March, 2021:
• The value of work completed up to Feb 28, 2021 was certified
by the architect and as a matter of policy, the contractee has
retained ₹ 1,30,000 as retention money which is 20% of the
certified work and paid the balance amount
• The cost of work completed subsequent to the architect’s
certificate was of ₹ 30,000.
• The expenditure incurred related to material purchase, wages
and other chargeable expenses were ₹ 5,10,000
• Materials of the value of ₹ 20,000 were lying on the site.
• A special plant was purchased specifically for this contract at ₹
40,000 and after use on this contract till 31st March, 2021; it
was valued at ₹ 25,000
You are required to compute the value of Work certified, cash
received for the certified work and Notional profit of the
contract for the year ended on 31st March, 2021.

2) Bhagwandas undertook a contract for ₹ 15,00,000 on an arrangement that 80% of


the work certified will be paid to them immediately and the remaining 20% will be
paid on the completion of the work.
In 2004, the amounts expended were: Materials ₹ 1,80,000; Wages ₹ 1,70,000;
Carriage ₹ 6,000; Cartage ₹ 1,000; Sundry expenses ₹ 3,000.
The work certified for ₹ 3,75,000 and 80% of this was paid.
In 2005, the amounts were expended as: Materials ₹ 2,20,000; Wages ₹ 2,30,000;
Carriage ₹ 23,000; Cartage ₹ 2000; Sundry expenses ₹ 4,000; ¾ of the contract
was certified as done by 31st December, 2005 and 80% of this was received in
cash. The value of work uncertified till that day was ₹ 20,000.
In 2006, the amounts expended were: Materials ₹ 1,26,000; Wages ₹ 1,70,000;
CMA PRIYADHARSHINI Contact no: 9840876583

Carriage ₹ 6000, Sundry expenses ₹ 3000. On 30th June, 2006, the work was
completed and the balance of contract price was received in cash.
Prepare the contract account and the contractee’s account for three years.

3) A contractor commenced a contract on 1.7.2011. The costing records


concerning the said contract reveal the following information as on
31.3.2012.

Amount ₹
Materials sent to site 7,74,300
Labour paid 10,79,000
Labour outstanding as on 31.3.2012 1,02,500
Salary to engineer 20,500 per month
Cost of plant sent to site (1.7.2011) 7,71,000
Salary to supervisor 9,000 per month
(3/4 time devoted to contract)
Administration & other expenses 4,60,600
prepaid administration expenses 10,000
Materials in hand at site as on 31.3.2012 75,800
CMA PRIYADHARSHINI Contact no: 9840876583

Plant used for the contract has an estimated life of 7 years with
residual value at the end of life ₹ 50,000. Some of the materials
costing ₹ 13,500 found unsuitable and sold out for ₹ 10,000.
Contract price was ₹ 45,00,000. On 31.3.2012 two third of the
contract was completed.
The architect issued certificate covering 50% of the contract price
and contractor has been paid ₹ 20,00,000 on account. Depreciation
on plant is charged on straight line basis. Prepare contract account.

4) Asita Ltd. undertook a contract for ₹ 2,50,000 on 1st July, 2009. On 30th
June, 2010 when the accounted were closed, the following details about
the contract were gathered:
₹
Materials purchased 50,000
Wages paid 22,500
General expenses 5,000
Plant purchased 25,000
Material in hand 30th June, 2010 12,500
Accrued wages 30th June, 2010 2,500
Work certified 1,00,000
Cash received 75,000
Work uncertified 7,500
Depreciation on Plant 2,500

The above contract contained an escalation clause which reads as


follows:
“In the event of prices of materials and rates of wages increase by
more than 5%, the contract price would be increased accordingly by
15% of the rise in the cost of materials and wages beyond 5% in each
CMA PRIYADHARSHINI Contact no: 9840876583

case”.
It was found that since the date of signing the agreement, the prices
of materials and wages rates increased by 25%. The value of work
certified does not take into account the effect of the above clause.

Prepare Contract account and find amount of increase in contract


price.

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