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a) $2.0 million In early 20X1, Textron Inc. entered into an agreement with Scantech Ltd. for the construction of a new office building. Construction is

a) $2.0 million

In early 20X1, Textron Inc. entered into an agreement with Scantech Ltd. for the construction of a new office building. Construction is expected to take three years to complete. The initial total estimated cost of the building was $28 million, and the price of the contract was set at $38 million. At December 31, 20X1, the total cumulative cost incurred was $18 million. Due to increasing costs of materials, the total estimated cost of the project at the end of 20X1 was $31 million. By the end of the 20X2 fiscal year, an additional $9 million of costs was incurred. At December 31, 20X2, the total estimated cost of the project remained the same as at December 31, 20X1.

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Working

Percentage of Gross profit on cost:

=[(38-31) 31]100

= 22.58%

Thus, for 20X2

= 922.58%

=$ 2 million (rounded off)

However, i dont understand why was used estimated cost instead of occurred cost.

And is there any other solutions.

Thank you

(38-18)/38 *100% = 52.63%

And then 9 * 52.63% = 4.7

Eventhough we dont have this options (maybe c) closer)

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