Arizona Desert Homes (ADH) constructed a new subdivision during 2023 and 2024 under contract with Cactus Company. Relevant data are summarized below: Contract amount Cost: Gross profit: Contract billings: 2023 2024 2023 2024 2023 2024 $3,000,000 1,200,000 600,000 800,000 400,000 1,500,000 1,500,000

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Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.