CMA Intermediate · Cost Accounting · Contract Costing
Mehta Constructions is building a bridge on a cost-plus basis with profit at 12% on cost. The cost of the contract is Rs 25,00,000. What is the contract price payable?
The contract price is Rs 28,00,000. Profit at 12% on cost of Rs 25,00,000 is Rs 3,00,000, and adding this to the cost gives the price. Treating profit as a percentage of selling price or subtracting it would give wrong figures.
- ARs 27,50,000
- BRs 28,00,000Correct
- CRs 22,00,000
- DRs 28,41,000
Explanation
Profit = 12% of 25,00,000 = 3,00,000. Contract price = 25,00,000 + 3,00,000 = 28,00,000. Rs 27,50,000 results from using 10%; Rs 22,00,000 wrongly deducts profit.
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