Contract Costing Exercise

The estimated price of the contract is RM5,500,000.

Work on the complex started on 1 October 2017. The accounting year ends on 30 June every year.

The following information is related to the contract for the year ended 30 June 2018:

                                                                      RM

Materials issued to site                                     550,000

Materials received from supplier                        485,000

Materials returned to store                                  77,000

Plant bought at cost (1 October 2017)                450,000

Wages – paid                                                   255,000

Subcontractor charges – paid                            108,000

Shares of head office expenses                           95,000

Additional information:

1.     It is the company’s policy to depreciate the non-current assets at 20% per annum.

2.     As at 30 June 2018:

            i.        Unused materials                       -        RM96,000

           ii.        Accrued wages                          -        RM55,000

          iii.        Prepaid subcontractor charges    -        RM49,000

3.     Value of work certified is RM2,500,000 and subjected to 10% retention money.

4.     Estimated future cost to complete the contract is RM3,471,500.

The company recognized its profit based on the value of work certified.