Examples of costs of Contract

Examples of costs of Contract

The contract cost may be classified into three category .i.e. directly allocated cost, General activity allocated to contract other cost which is to be refunded under term of contract.

Example of Contract Costs

Material	120,000
Rent for storing site material	20,000
Labor	10,000
Plant and machinery ( 2 Years)	50,000
Insurance of Plant	2,000
Administration Manager Salary	5,000

Solution

Material	120,000	Direct allocated
Rent for storing site material	20,000	Direct allocated
Labor	10,000	Direct allocated
Plant and machinery ( 2 Years)	25,000	Direct allocated
Insurance of Plant	2,000	General Activity
Administration Manager Salary	Nil	General Activity
Total Contract Cost	177,000

Insurance cost is general activity which can be allocated. However, Manager Salary is not directly allocated to contract therefore it is not part of contract cost.

Example of Non Contract Costs

The following are the typical examples of non cost, administration expenses, selling expenses, research and development cost. For Example ABC & company is awarded to construct a tunnel, the cost incurred during the year on tunnel construction

Material Cost	$  150,000
Plant imported but could not utilized	$  200,000
Research to reduce material costs	$  6,000
Accounts Manager Salary	$  2,000
Skilled Labor	$   4,000

  

Solution

Material Cost	$  150,000
Plant imported but could not utilized	$  Nil
Research to reduce material costs	$  Nil
Accounts Manager Salary	$  Nil
Skilled Labor	$   4,000
Contract Cost	$ 154,000