Negotiations on a new contract have started. The contractor has 500 employees, the contract is 2.5% of the contractor's income, and personnel cost is 55% of the direct cost. The contractor has submitted estimated overhead costs equal to 88.9% of the direct cost of the project. Briefly explain how you would make a model-based decision to approve or disapprove the contract.
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- JUBAIL BUILDERS is constructing a multi-unit residential complex. In the prior year, JUBAIL BUILDERS entered into a contract with a customer for a specific unit that is under construction. JUBAIL has determined that the contract is a single performance obligation satisfied over time. JUBAIL BUILDERS gathered the following information for the contract during the year. JUBAIL BUILDERS-Year Ended December 31, 2018: Costs to date 10,500,000 Future expected costs 7,000,000 Work certified to date 12,600,000 Expected Sales value 22,400,000 Revenue taken in earlier period 8,400,000 Costs taken in earlier periods 6,650,000 Calculate the amounts to be included in the statement of profit or loss in respect of revenue and costs for the year ended December 31, 2018 on both methods (I) Input Method (cost basis), and (II) Output Method (Sales Basis) Calculate the total expected profit for the year 2018?George Co. enters into a contract to build an apartment for Jungle Co. For a fixed fee of P20,000,000. At contract inception, George Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over time. George Co. determines that the measure of progress that best depicts its performance in the contract is input method based on costs incurred. George estimates that the total contract costs would amount to P16,000.000 over the construction period. George incurs contract costs of P2,000,000 during the year. How much revenue is recognized for the year?ABC Corp. uses the cost to cost method to account for its construction contracts. The contract price of the project is P2,000,000. ABC Corp. estimates that it will take 36 months to complete the contract. The following information for its construction contract is presented below: 20x1 20x2 20x3 Cost incurred to date 350,000 1,250,000 ? Realized gross profit for the current year 50,000 300,000 80,000 1. What is the percentage of completion rate in year 20x1? 2. What is the estimated cost to complete in year 20x1? 3. What is the percentage of completion rate in year 20x2? 4. What is the total estimated cost to complete in 20x3?
- DMCI entered into a fixed price contract for the construction of a road for Camella Corp. DMCI determines the stage of completion of construction contracts using the “cost to cost method”. The estimated total contract cost is P50 million. The following were the total actual costs incurred by DMCI during the first year of the construction: Cost of negotiating the contract (charge immediately as expense) 500,000 Costs of hiring equipment 700,000 Costs of materials purchased but not yet used in construction 2,500,000 Costs of materials used in construction 15,000,000 Costs of moving plant, equipment and materials to and from the contract site 200,000 Depreciation of equipment used in construction 600,000 Depreciation of idle construction equipment 300,000 Site labor costs 5,000,000 Site supervision costs 1,000,000 How much is the cost incurred to date?A construction company enters a long-term contract with a customer. The contract price is $2,500,000. Year 1 costs are $700,000, and it's estimated the project is 30% complete. Using the percentage-of-completion method, what profit is recognized in Year 1? A) $50,000 B) $210,000 C) $750,000 D) $1,800,000Oriole Company enters into a contract with a customer to build a warehouse for $401900, with a performance bonus of $101900 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 20% per week for every week beyond the agreed-upon completion date. The contract requirements are similar to contracts that Oriole has performed previously, and management believes that such experience is predictive for this contract. Management estimates that there is a 50% probability that the contract will be completed by the agreed-upon completion date, a 30% probability that it will be completed 1 week late, and a 20% probability that it will be completed 2 weeks late. What is the total transaction price for this revenue arrangement? $489534 $503800 $483420 $463040
- A builder enters into a contract with a customer to redesign and update an office buidling for an agreed upon contract price of $2,400,000 and construction is estimated to take three years at a total estimated cost of $2,000,000. Assuming costs may fluctuate over the 3-year construction period. Which statement is most accurate regarding revenue recognition for this contract? The builder should recognize revenue over time using the cost-to-cost (percentage of completion) method. The builder should wait to recognize revenue until the full construction is complete at the end of the three year period. The builder should recognize recognize revenue across the three year construction period as they collect cash payments. The builder should recognize all revenue for the contract at the start of construction when the contract is initially signed.In May 15, 2020, Starr Construction Company was the successful bidder on a contract with the Arizona Government to build a pedestrian overpass in Flagstaff, Arizona. The firm utilizes a job order costing system, and this job was assigned Job #515. The contract price for the overpass was $450,000. The owners of Starr Construction agreed to a completion date of December 15, 2020, for the contract. The firm’s engineering and cost accounting departments estimated the following costs for completion of the overpass: $120,000 for direct material, $135,000 for direct labor, and $81,000 for overhead. The firm began to work on the overpass in August. During August, direct material cost assigned to Job #515 was $30,900 and direct labor cost associated with Job #515 was $47,520. The firm uses a predetermined overhead rate of 60 percent of direct labor cost. Required: Prepare a job order cost sheet for Job #515, including all job details, and post the appropriate cost information…In 20x1, ABC Co. enters into a contract to construct a building for a customer. ABC identifies its performance obligation to be satisfied over time. ABC measures its progress on the contract based on costs incurred. The contract price is P20,000,000. ABC has an unconditional right to all billings made in accordance with the billing schedule stated in the contract. Information on the construction is as follows: 20x1 20x2 20x3 Contract costs incurred per year Billings per year Collections on billings per year 1,920,000 3,000,000 5,650,000 3,850,000 8,160,000 7,320,000 10,000,000 500,000 6600,000 Estimated costs to complete (at each year-end) from the Student Ha8,840,000 1,720,000 ons, quizzes rection with any academic work, abetting of the same: 1st violation How much profit is recognized on the contract in 20x3?
- In 20x1, ABC Co. enters into a contract to construct a building for a customer. ABC identifies its performance obligation to be satisfied over time. ABC measures its progress on the contract based on costs incurred. The contract price is P20,000,000. ABC has an unconditional right to all billings made in accordance with the billing schedule stated in the contract. Information on the construction is as follows: 20x1 20x2 20x3 Contract costs incurred per year Billings per year Collections on billings per year Estimated costs to 8,160,000 7,320,000 1,920,000 10,000,000 7,000,000 3,000,000 9,500,000 6,650,000 3,850,000 complete (at each year-end) 8,840,000 1,720,000 How much profit is recognized on the contract in 20x3?Zentric Garage Inc. enters into a contract to provide services totaling $78,000. The contract includes a potential performance bonus based on when Zentric Garage completes the services. Zentric Garage estimates the following scenarios for completion. (Click the icon to view the scenarios.) Determine the bonus using the most-likely-amount approach. Determine the bonus using the most-likely-amount approach under scenario 1. The bonus for this contract using the most-likely-amount approach under scenario 1 is $ Determine the bonus using the most-likely-amount approach under scenario 2. The bonus for this contract using the most-likely-amount approach under scenario 2 is $ Determine the bonus using the most-likely-amount approach under scenario 3. The bonus for this contract using the most-likely-amount approach under scenario 3 is $ Ente Scenarios Complete within 3 days 5 days 8 days Probability Bonus Scenario 1 Scenario 2 80% 47% 15% 38% 5% 15% $ 13,000 $ 8,000 $ 3,500 Print Done…On September 1, 20x1, ABC Co. enters into a contract with a customer to remodel a plant's electrical wirings and install a new generator for a total consideration of P12. The remodeling and the installation are treated as a single performance obligation satisfied over time. The expected contracts costs are as follows: Generator 4,000,000 Other costs 5,000,000 Expected total contract costs 9,000,000 Additional information: ABC Co. uses the cost-to-cost method in measuring its progress towards the complete satisfaction of the performance obligation. ABC Co. incurs total costs of P6,000,000 in 20x1, including the cost of the generator. The customer obtains control of the generator when it is delivered to the site in December 20x1. However, the generator will not be installed until March 20x2. ABC Co. regards the cost of the generator as significant in…