Brilliant Inc. is constructing a skyscraper in the heart of town and has signed a fixed price two year contract for $21.0 million with the local authorities. It has incurred the following cost relating to the contract by the end of first year:
• Material cost = $5 million
• Labor cost = $2 million
• Construction overhead = $2 million
• Marketing costs = $0.5 million
• Depreciation of idle plant and equipment = $0.5 million
At the end of the first year, it has estimated cost to complete the contract = $9 million.
What profit or loss from the contract should Brilliant Inc. recognize at the end of the first year?
(a) $1.5 million (9/18 × 3.0)
(b) $1.0 million (9/18 × 2.0)
(c) $1.05 million (10/19 × 2.0)
(d) $1.28 million (9.5/18.5 × 2.5)