Mediocre Inc. has entered into a very profitable fixed price contract for constructing a high-rise building over a period of three years. It incurs the following costs relating to the contract during the first year: • Cost of material = P2.5 million • Site labor cost = P2.0 million • Agreed administrative costs as per contract to be reimbursed by the customer = P1 million. • Depreciation of the plant used for the construction = P0.5 million. • Marketing costs for selling apartments, when they are ready = P1.0 million. • Depreciation of idle plant and equipment =P.5 million Total estimated cost of the project = P18 million The percentage of completion (overtime) of this contract at year-end is: 33 1/3% (= 6.0/18.0) 27% (= 4.5/16.5) 39% (= 7.0/18.0)
Mediocre Inc. has entered into a very profitable fixed price contract for constructing a high-rise building over a period of three years. It incurs the following costs relating to the contract during the first year:
• Cost of material = P2.5 million
• Site labor cost = P2.0 million
• Agreed administrative costs as per contract to be reimbursed by the customer = P1 million.
•
• Marketing costs for selling apartments, when they are ready = P1.0 million.
• Depreciation of idle plant and equipment =P.5 million
Total estimated cost of the project = P18 million
The percentage of completion (overtime) of this contract at year-end is:
33 1/3% (= 6.0/18.0)
27% (= 4.5/16.5)
39% (= 7.0/18.0)
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