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.