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Queensbridge Corp

question 96

Essay

Queensbridge Corp.started a contract in June 2017 to build a bridge at a fixed price of $45 million.The bridge was to be completed by October 2019 at a total estimated cost of $35 million.Total cumulative costs incurred by the end of December 2017 and 2018 were $7 million and $24 million,respectively.Because of cost overruns in 2018,it is now expected that the project will cost $5,000,000 more than originally estimated.Final costs at the end of the project totaled $36 million.Queensbridge Corp.follows the guidance in IFRS.
Required:
Determine the amount of gross profit to be recognized for the years ended December 31,2017 and December 31,2018.


Definitions:

Mean Squared Error

A measure of the average squared difference between the estimated values and the actual value.

Forecast Error

The difference between actual demand and forecasted demand, indicating the accuracy of demand projections.

Holt's Model

A forecasting technique that extends exponential smoothing to capture trends in the data.

Alpha

In investing, alpha is a measure of performance on a risk-adjusted basis, comparing an investment's excess returns to the market's returns.

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