A construction company is currently undertaking three separate contracts and information relating to these contracts for the previous year, together with other relevant data, is shown below.

The cost of operating the Construction Services Department, which provides technical advice to each of the contracts, is apportioned over the contracts in proportion to wages incurred.
Contract STU is scheduled for handing over to the contractee in the near future and the site engineer estimates that the extra costs required to complete the contract, in addition to those tabulated above, will total £138 000. This amount includes an allowance for plant depreciation, construction services and for contingencies.

Required: .

(a) Construct a cost account for each of the three contracts for the previous year and show the cost of the work completed at the year end. (9 marks)

(b) (i) Recommend how much profit or loss should be taken, for each contract, for the previous year. (7 marks)
(ii) Explain the reasons for each of your recommendations in (b)(i)
above.

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Contract price Balances brought forward at beginning of year: Cost of work completed Material on site Written down value of plant and machinery Wages accrued Profit previously transferred to Profit/Loss/A/c Transactions during year: Material delivered to sites Wages paid Payments to sub-contractors Salaries and other costs Written down value of plant: issued to sites transferred from sites Contract MNO Contract Contract PQR STU 000s 000s 000s 800 675 1100 Construction Services Dept. Overhead 000s 190 35 32 II II 370 - 25 170 - 1 15 281 40 99 180 20 47 110 - 35 - 6 20 25 1121 12 81 90 15 18 || | |