DMCI entered into a fixed price contract for the construction of a road for Camella Corp. DMCI determines the stage of completion of construction contracts using the “cost to cost method”. The estimated total contract cost is P50 million. The following were the total actual costs incurred by DMCI during the first year of the construction: Cost of negotiating the contract (charge immediately as expense) 500,000 Costs of hiring equipment 700,000 Costs of materials purchased but not yet used in construction 2,500,000 Costs of materials used in construction 15,000,000 Costs of moving plant, equipment and materials to and from the contract site
DMCI entered into a fixed price contract for the construction of a road for Camella Corp. DMCI determines the stage of completion of construction contracts using the “cost to cost method”. The estimated total contract cost is P50 million. The following were the total actual costs incurred by DMCI during the first year of the construction:
|
Cost of negotiating the contract (charge immediately as expense) |
500,000 |
|
Costs of hiring equipment |
700,000 |
|
Costs of materials purchased but not yet used in construction |
2,500,000 |
|
Costs of materials used in construction |
15,000,000 |
|
Costs of moving plant, equipment and materials to and from the contract site |
200,000 |
|
|
600,000 |
|
Depreciation of idle construction equipment |
300,000 |
|
Site labor costs |
5,000,000 |
|
Site supervision costs |
1,000,000 |
How much is the cost incurred to date?
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