Hectanooga Ltd. (Hectanooga) is a large construction engineering company. In 2014, Hectanooga was awarded a contract by a provincial government to widen a 150 kilometre stretch of a major highway. Hectanooga will receive $187,000,000 for the work, from which it must pay the costs of construction. The company has agreed to complete the work by September 15, 2017. Information regarding the yearly progress of the contract measured in different ways is provided below:

Required:
Hectanooga’s new vice-president of finance understands that there are different ways to calculate the percentage-of-completion of a project. The vice-president has asked you to calculate the amount of revenue that would be recognized in each year of the contract using three different methods of estimating the percentage completed:

a. Costs incurred

b. Number of kilometres of the highway completed during the year

c. Labour hours worked The vice-president would also like you to explain how he should choose among the three methods and which method would provide the best indication of the progress of the project to external stakeholders.

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Costs 2014 2015 2016 2017 Total $18,000,000 $42,000,000 $54,000,000 $29,000,000 $143,000,000 Number of kilometres completed 16 55 51 28 150 during the year Labour hours 145,000 292,000 307,000 222,000 966,000 worked