Contract costing

HR Construction plc makes up its accounts to 31 March each year. The following details have been extracted in relation to two of its contracts:

Contract A

Contract B

Commencement date

1 April 1999

1 December 1999

Target completion date

31 May 2000

30 June 2000

Retention %

4

3

£000

£000

Contract price

2000

550

Materials sent to site

700

150

Materials returned to stores

80

30

Plant sent to site

1000

150

Materials transferred

(40)

40

Materials on site

31 March 2000

75

15

Plant hire charges

200

30

Labour cost incurred

300

270

Central overhead cost

75

18

Direct expenses incurred

25

4

Value certified

1500

500

Cost of work not certified

160

20

Cash received from client

1440

460

Estimated cost of completion

135

110

Depreciation is charged on plant using the straight line method at the rate of 12% per annum.

Required:

(a) Prepare contract accounts, in columnar format, for EACH of the contracts A and B, showing clearly the amounts to be transferred to profit and loss in respect of each contract.

(b) Show balance sheet extracts in respect of EACH contract for fixed assets, debtors and work in progress.

(c) Distinguish between job, batch and contract costing. Explain clearly the reasons why these methods are different.