CMA Intermediate · Cost Accounting · Contract Costing
Sharma Infra Ltd has a contract with a total contract price of Rs 50,00,000. Costs incurred to date are Rs 18,00,000 and estimated further costs to complete are Rs 27,00,000. Stage of completion is measured by the proportion of cost incurred to total estimated cost. Revenue to be recognised to date is:
Revenue recognised is Rs 20,00,000. Total estimated cost is Rs 45,00,000, so the stage of completion is 18,00,000 divided by 45,00,000, which is 40 percent. Applying 40 percent to the contract price of Rs 50,00,000 gives the revenue to date.
- ARs 18,00,000
- BRs 20,00,000Correct
- CRs 22,50,000
- DRs 30,00,000
Explanation
Total estimated cost = 18,00,000 + 27,00,000 = 45,00,000. Stage of completion = 18/45 = 40%. Revenue = 40% x 50,00,000 = Rs 20,00,000. Rs 18,00,000 is just the cost incurred, and Rs 22,50,000 wrongly uses 18/40 style base errors rather than total estimated cost.
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