Page 237 - DCOM202_COST_ACCOUNTING_I

Unit 11: Contract Costing

6. Work of specialised character, for which facilities are not internally available, is offered to Notes
a …………………… .
7. In ……………………, a separate contract account is prepared for each individual.
8. If the work certified is less then …………………… of the contract, no profit should be
transferred to profit and loss account.

9. The preparation of contract account is the essence of …………………… .
10. …………………… is a modified method of contract costing.
11. …………………… is the difference between the value of work-in-progress certified and the
cost of work-in-progress certified
State whether the following statements are true or false:
12. Contract costing is the method or technique of ascertaining cost of a contract.
13. A contract generally takes more than three year to complete.
14. The expenses incurred exclusively for a particular contract are treated as indirect expenses.

15. The contract price is governed by the contract, the contractees will also not suffer from risk
of loss.

11.3 Summary

z z Under contract costing, the price is paid in various installments depending upon the
progress of work. In job costing, the selling price of a job is paid after completing the job
in full.

z z Contract costing pertains to construction while the job costing is confined to production.
z z In contract costing, the cost computation is simple while in the job costing it is complex
because of the overheads.

z z Contract costing is adopted in long-term contracts whereas the job costing is confined to
finished goods for a small duration of time. contract costing is the technique of ascertaining
cost of a contract.

11.4 Keywords

Ascertaining Cost: Determining cost
Contract Cost: Cost relating to specific contract
Material Cost: Expenditure on raw materials and supplies

11.5 Review Questions

1. What is contract costing? To which industries is it found suitable?
2. How does contract costing differ form job costing? Discuss contract costing procedure in
detail.
3. Explain the various features of contract costing.
4. What is a contract account? What important points should be borne in mind in its
preparation?
5. What are the main features of cost-plus contract? Discuss its advantages and disadvantages.

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