Skimpy plc is a construction company currently undertaking three large construction contracts in its South West Division. Information relating to these three contracts for the year ended 31 October 20X9 is as follows:

Skimpy operates a local head office in the South West Division, the costs of which totalled £70,000 in the year ended 31 October 20X9. These costs are to be apportioned over the three construction contracts in the region in proportion to the wages paid.
The Plymouth contract is nearing completion and the site architect estimates that the additional costs to complete the contract will total £60,000. This sum includes an allowance for all anticipated costs including overheads and contingencies.
Required:

(a) Prepare a cost account for each of the three contracts for the year ended 31 October 20X9 and show the cost of the work completed at the end of the year. (16 marks)

(b) For each contract recommend, giving reasons, how much profit or loss should be taken for the year ended 31 October 20X9.

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Fixed contract price Balances brought forward at 1 November 20X8 Cost of work completed Materials on site Plant at written down value Transactions during year Plymouth Torquay contract contract Truro contract 000 000 000 600 800 1,200 240 80 18 6 90 25 Materials delivered to site Wages Payments to subcontractors Salaries and other direct costs 18 8708 60 130 80 75 105 30 10 46 32 1:00 8 Plant at written down value - issued to sites - transferred to other sites 63 13 115 77