Reference no: EM132894012

Question - Scenario - Mega construction Plc, are contractors for 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 2011.

Material purchases Material purchases £65000

Material transfers in from other site £28000

Material transfer out to another site £5000

Material on site, not yet used £28000

Direct labour £29000

Direct labour accrued £3500

Indirect labour £5000

Indirect labour accrued £1800

Plant delivered to site £60000

Hire of equipment's £27000

Hire charges owing £8400

Head office charges £58000

Cost of work yet not certified £27000

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.

Required -

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

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

3. Prepare contract cost statement for Mega Construction Plc.