Scenario Mega construction Plc, are contractor for the replacement of a high technology factory for a multinational company. The total value of the contract is £ 3,500,000 over a three year period. The contract commenced on 1st March 2011, & the following details are available as at 28th February 2012 Material purchases65,000 Material transfers in from other site28,000 Material transfer out to another site.5,000 Material on-site, not yet used28,000 Direct labour29,000 Direct labor accrued3,500 Indirect labour5,000 Indirect labour accrued1,800 Plant delivered to site60,000 Hire of equipment’s27,000 Hire charges owing8,400 Head office charges58,000 Cost of work yet not certified27,000 Mega Construction Plc, have received payment of £ 540,000 which represent work certified as completed by architects as at 28 February 2011, less a 15% retention. The company takes credits for three fourth of the profits on work certified (less retention). The plant is estimated to last the life of the contract, & no residual value is expected. 

2.1 Explain the principle of contract costing in the construction industry. 

2.2 Calculate the attributable profit/ loss & value of work certified.

2.3 Prepare contract cost statement for Mega Construction Plc.