Page 233 - DCOM202_COST_ACCOUNTING_I

Unit 11: Contract Costing

Solution Notes

Particulars Amount (`)
Total expenditure upto 31 March, 2009 90,000
st
Add : Additional estimated expenditure 20,000
Total Estimated Expenditure 1,10,000
Contract price 1,50,000
Less : Total estimated expenditure 1,10,000
Estimated Profit 40,000
Profit to be credited to profit and loss account :
Workcertified Cashreceived
= Estimatedprofit × ×
r
Contractprice Workcertified
,
,
1 00 000 90 000
,
,
= 40 000 × × = ` 24,000.
,
,
,
,
1 50 000 1 00 000
Example: Compute a conservative estimate of profit on contract (which is 80% complete)
from the following particulars. Illustrate at least four methods of computing the profit:
Contract price ` 1,93,600
Total expenditure to date ` 1,12,000
Work certified ` 1,40,000
Work uncertified ` 20,200
Estimated further expenditure to complete the contract
(including contingencies) ` 30, 400
Cash received ` 1,00,000
Solution:
Notional Profit = Work certified + Work uncertified – Total expenditure to date
= 1,40,000 + 20,200 – 1,12,000 = ` 48,200

Estimated Profit = Contract price – [Total expenditure to date + Estimated expenditure to
complete the contract]
= 1,93,600 – [1,12,000 + 30,400] = ` 51,200
(a) First Method: Profit = Notional profit × (2/3)

= 48,200 × (2/3) = ` 32,133
2 Cashreceived
(b) Second Method: Profit = Notionalprofit×× Work certified
3
,
,
2 100 000
= , × 48 200 × = ` 22,952
,
,
3 140 000
Work certified
(c) Third Method: Profit = Estimatedprofit×
Contractprice
,
,
140 000
= , × 51 200 = ` 37,025
,
,
193 600

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