Contract Costing – NBC Institute

MI – Nov 2020 – L1 – SA – Q8 – Costing Methods

Calculate the profit to be taken from a contract based on work certified and cost of work certified.

Question

: IJKL is a construction company with a contract which is 48% complete and the policy is to recognise three-quarters of notional profit. Value of work certified is N4,500,000, cash received from progress payment is N3,500,000, and the cost of work certified is N4,140,000. The contract sum of the project is N10,000,000.

What will be the profit taken?

A. N583,333

B. N385,000

C. N373,333

D. N210,000

E. N186,667

Answer

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Tags: Contract Costing, Notional Profit, Work certified
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

MI – May 2018 – L1 – SA – Q11 – Costing Methods

Basis for requesting progress payments in contracts.

Question

What is the basis for requesting for progress payments on an on-going contract?
A. Contractor’s invoice
B. Architect’s certificate
C. Bill of quantities
D. Inspection report
E. Certificate of Occupancy

Answer

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Tags: Contract Costing, Payments
Level: Level 1

Topic: Costing Methods
Series: MAY 2018

MI – May 2022 – L1 – SB – Q2b – Costing Methods

Prepare accounts for two construction contracts using a columnar format.

Question

Wazobia is a construction company currently undertaking two separate contracts. From the following information relating to the just-concluded financial year and other data extracted from the records of the company, you are required to prepare accounts for the two contracts using a columnar format:

	Contract WXYZ002	Contract WXYZ003
Contract Price	₦5,000,000	₦3,500,000
Material Purchased	₦1,650,000	₦950,000
Plant & Machinery Transferred to Site	₦4,500,000	₦3,000,000
Wages Paid	₦1,460,000	₦1,200,000
Other Expenses	₦900,000	₦460,000
Wages Accrued	₦140,000	₦100,000
Value of Work Certified	₦2,950,000	₦1,800,000
Cost of Work Not Certified	₦1,600,000	₦1,450,000
Plant & Machinery Written Down	₦3,600,000	₦2,400,000
Material on Site C/F	₦850,000	₦100,000

Answer

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Tags: Construction Contracts, Contract Costing, Cost Allocation
Level: Level 1

Topic: Costing Methods
Series: MAY 2022

MI – May 2022 – L1 – SB – Q2a – Costing Methods

Identifying problems associated with site and contract work and ways to mitigate them.

Question

State THREE problems associated with site and contract work and list TWO ways to mitigate against them.

Answer

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Tags: Contract Costing, Site Management
Level: Level 1

Topic: Costing Methods
Series: MAY 2022

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

Question

Joyle Construction Limited is currently working on two contracts with the following details as at December 31.

Details	Contract A (₦’000)	Contract B (₦’000)
Material	16,140	23,100
Wages	61,900	23,136
Expenses on site	8,270	10,344
Plant purchased	191,000	78,000
Accrued wages	5,060	2,690
Materials as at 31/12	2,670	7,680
Value of work certified	140,000	102,000
Cash received on certified work	119,000	76,500
Completed work not yet certified	4,450	2,640
Head office charges apportioned	15,660	12,230
Plant value as at 31/12	152,800	62,400

The contract value is ₦500,000,000 for Contract A and ₦350,000,000 for Contract B.

Required:
Prepare contract “A” and contract “B” accounts for Joyle Construction Limited as at December 31 in a columnar form. Show the profit taken at year-end and the balances carried forward. (Show workings where necessary).

Answer

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Tags: Contract Costing, Profit Recognition, Work in Progress
Level: Level 1

Topic: Costing Methods
Series: MAY 2023

MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

Question

Piano Construction Company Limited has been in operation for many years. The following relates to Contract AO50 on the Akure-Owo site as at 31st Dec., 2017.

Item	Amount (N’000)
Wages	42,156
Materials delivered directly to site	54,203
Materials from main stores	657
Materials transferred to Akure-Ibadan Site	1,590
Plant purchased at cost	12,500
Plant transferred to Akure-Owo Site	5,250
Sub-contractor’s charges	19,580
Site expenses	5,086
Materials on site at 31st Dec.	18,300
Plant on site at 31st Dec.	14,750
Accrued wages at 31st Dec.	921
Prepayments at 31st Dec.	507
Value of work certified	117,500
Cost of work certified	102,300
Progress payments received from client	115,000

Head office charges are 10% of wages.

The contract value is N550,000,000 and it is anticipated that there will be further costs of N375,000,000 (including rectification claims). As this is the 1st year of the contract, no profit has been taken previously.

Required:

Prepare the Contract Account for project AO50 for the year ended 31st December, 2017. (15 Marks)
Prepare the Statement of financial position extracts as at 31st December, 2017. (3 Marks)
What is the expected profit on the contract on completion? (2 Marks)

Answer

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Tags: Construction Project, Contract Costing, Cost Management, Financial Reporting, Profit Calculation
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SA – Q8 – Costing Methods

Identify the item that is not a problem associated with site and contract works.

Question

Which of the following is NOT a problem associated with site and contract works?

A. Pilferage of materials, tools, etc
B. Unauthorised use of equipment and vehicles
C. Simple quantity budget for materials usage
D. Incorrect labour bookings
E. General difficulties of recording and paperwork

Answer

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Tags: Contract Costing, Cost Management, Site Works
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

MI – Nov 2020 – L1 – SA – Q8 – Costing Methods

Calculate the profit to be taken from a contract based on work certified and cost of work certified.

Question

What will be the profit taken?

A. N583,333

B. N385,000

C. N373,333

D. N210,000

E. N186,667

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contract Costing, Notional Profit, Work certified
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

MI – May 2018 – L1 – SA – Q11 – Costing Methods

Basis for requesting progress payments in contracts.

Question

Answer

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Tags: Contract Costing, Payments
Level: Level 1

Topic: Costing Methods
Series: MAY 2018

MI – May 2022 – L1 – SB – Q2b – Costing Methods

Prepare accounts for two construction contracts using a columnar format.

Question

	Contract WXYZ002	Contract WXYZ003
Contract Price	₦5,000,000	₦3,500,000
Material Purchased	₦1,650,000	₦950,000
Plant & Machinery Transferred to Site	₦4,500,000	₦3,000,000
Wages Paid	₦1,460,000	₦1,200,000
Other Expenses	₦900,000	₦460,000
Wages Accrued	₦140,000	₦100,000
Value of Work Certified	₦2,950,000	₦1,800,000
Cost of Work Not Certified	₦1,600,000	₦1,450,000
Plant & Machinery Written Down	₦3,600,000	₦2,400,000
Material on Site C/F	₦850,000	₦100,000

Answer

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Tags: Construction Contracts, Contract Costing, Cost Allocation
Level: Level 1

Topic: Costing Methods
Series: MAY 2022

MI – May 2022 – L1 – SB – Q2a – Costing Methods

Identifying problems associated with site and contract work and ways to mitigate them.

Question

State THREE problems associated with site and contract work and list TWO ways to mitigate against them.

Answer

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Tags: Contract Costing, Site Management
Level: Level 1

Topic: Costing Methods
Series: MAY 2022

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

Question

Joyle Construction Limited is currently working on two contracts with the following details as at December 31.

Details	Contract A (₦’000)	Contract B (₦’000)
Material	16,140	23,100
Wages	61,900	23,136
Expenses on site	8,270	10,344
Plant purchased	191,000	78,000
Accrued wages	5,060	2,690
Materials as at 31/12	2,670	7,680
Value of work certified	140,000	102,000
Cash received on certified work	119,000	76,500
Completed work not yet certified	4,450	2,640
Head office charges apportioned	15,660	12,230
Plant value as at 31/12	152,800	62,400

The contract value is ₦500,000,000 for Contract A and ₦350,000,000 for Contract B.

Answer

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Tags: Contract Costing, Profit Recognition, Work in Progress
Level: Level 1

Topic: Costing Methods
Series: MAY 2023

MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

Question

Piano Construction Company Limited has been in operation for many years. The following relates to Contract AO50 on the Akure-Owo site as at 31st Dec., 2017.

Item	Amount (N’000)
Wages	42,156
Materials delivered directly to site	54,203
Materials from main stores	657
Materials transferred to Akure-Ibadan Site	1,590
Plant purchased at cost	12,500
Plant transferred to Akure-Owo Site	5,250
Sub-contractor’s charges	19,580
Site expenses	5,086
Materials on site at 31st Dec.	18,300
Plant on site at 31st Dec.	14,750
Accrued wages at 31st Dec.	921
Prepayments at 31st Dec.	507
Value of work certified	117,500
Cost of work certified	102,300
Progress payments received from client	115,000

Head office charges are 10% of wages.

Required:

Prepare the Contract Account for project AO50 for the year ended 31st December, 2017. (15 Marks)
Prepare the Statement of financial position extracts as at 31st December, 2017. (3 Marks)
What is the expected profit on the contract on completion? (2 Marks)

Answer

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Tags: Construction Project, Contract Costing, Cost Management, Financial Reporting, Profit Calculation
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SA – Q8 – Costing Methods

Identify the item that is not a problem associated with site and contract works.

Question

Which of the following is NOT a problem associated with site and contract works?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contract Costing, Cost Management, Site Works
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

Question Tag: Contract Costing

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MI – Nov 2020 – L1 – SA – Q8 – Costing Methods

Calculate the profit to be taken from a contract based on work certified and cost of work certified.

MI – May 2018 – L1 – SA – Q11 – Costing Methods

Basis for requesting progress payments in contracts.

MI – May 2022 – L1 – SB – Q2b – Costing Methods

Prepare accounts for two construction contracts using a columnar format.

MI – May 2022 – L1 – SB – Q2a – Costing Methods

Identifying problems associated with site and contract work and ways to mitigate them.

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

MI – Mar-Jul 2020 – L1 – SA – Q8 – Costing Methods

Identify the item that is not a problem associated with site and contract works.

MI – Nov 2020 – L1 – SA – Q8 – Costing Methods

Calculate the profit to be taken from a contract based on work certified and cost of work certified.

MI – May 2018 – L1 – SA – Q11 – Costing Methods

Basis for requesting progress payments in contracts.

MI – May 2022 – L1 – SB – Q2b – Costing Methods

Prepare accounts for two construction contracts using a columnar format.

MI – May 2022 – L1 – SB – Q2a – Costing Methods

Identifying problems associated with site and contract work and ways to mitigate them.

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

MI – Mar-Jul 2020 – L1 – SA – Q8 – Costing Methods

Identify the item that is not a problem associated with site and contract works.

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MI – Nov 2020 – L1 – SA – Q8 – Costing Methods

Calculate the profit to be taken from a contract based on work certified and cost of work certified.

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MI – May 2018 – L1 – SA – Q11 – Costing Methods

Basis for requesting progress payments in contracts.

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MI – May 2022 – L1 – SB – Q2b – Costing Methods

Prepare accounts for two construction contracts using a columnar format.

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Identifying problems associated with site and contract work and ways to mitigate them.

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MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

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MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

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MI – Mar-Jul 2020 – L1 – SA – Q8 – Costing Methods

Identify the item that is not a problem associated with site and contract works.

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MI – Nov 2020 – L1 – SA – Q8 – Costing Methods

Calculate the profit to be taken from a contract based on work certified and cost of work certified.

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MI – May 2018 – L1 – SA – Q11 – Costing Methods

Basis for requesting progress payments in contracts.

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MI – May 2022 – L1 – SB – Q2b – Costing Methods

Prepare accounts for two construction contracts using a columnar format.

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MI – May 2022 – L1 – SB – Q2a – Costing Methods

Identifying problems associated with site and contract work and ways to mitigate them.

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MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

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MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

You're reporting an error for "MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods"

MI – Mar-Jul 2020 – L1 – SA – Q8 – Costing Methods

Identify the item that is not a problem associated with site and contract works.

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