Exercise 5-28 (Algo) Methods of Estimating Costs: Engineering Estimates (LO 5-1, 2) Ferdinand Construction (FC) manages the design and construction of hospitals. Ferdinand has developed several formulas that it uses to quote jobs. These include costs of basic construction but exclude equipment and furniture. These estimates are also dependent on the purpose of the hospital (teaching hospitals are more costly to build) and location (downtown hospitals are more costly to build). Both of these are based on the building costs. The estimated costs also depend on whether the hospital has few or many stories (high-rise buildings are more expensive). The following are the cost estimates for one region in the Northeast: Design costs $ 15,006,000 Building costs – per square foot (low-rise) 360 Building costs – per square foot (high-rise) 420 Downtown premium 60% Teaching hospital premium 20% Required: A local university medical school has asked Ferdinand Construction to provide a quote on a high-rise teaching hospital located in the city center downtown. The university estimates the hospital will be 306,000 square feet in total. Based on the engineering estimates above, what will such a hospital cost to build? Note: Enter your answers in thousands.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Exercise 5-28 (Algo) Methods of Estimating Costs: Engineering Estimates (LO 5-1, 2) Ferdinand Construction (FC) manages the design and construction of hospitals. Ferdinand has developed several formulas that it uses to quote jobs. These include costs of basic construction but exclude equipment and furniture. These estimates are also dependent on the purpose of the hospital (teaching hospitals are more costly to build) and location (downtown hospitals are more costly to build). Both of these are based on the building costs. The estimated costs also depend on whether the hospital has few or many stories (high-rise buildings are more expensive). The following are the cost estimates for one region in the Northeast: Design costs $ 15,006,000 Building costs – per square foot (low-rise) 360 Building costs – per square foot (high-rise) 420 Downtown premium 60% Teaching hospital premium 20% Required: A local university medical school has asked Ferdinand Construction to provide a quote on a high-rise teaching hospital located in the city center downtown. The university estimates the hospital will be 306,000 square feet in total. Based on the engineering estimates above, what will such a hospital cost to build? Note: Enter your answers in thousands.
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