Sunshine Contractors Started a Contract in January 2011 to Build

question 81

Multiple Choice

Sunshine Contractors started a contract in January 2011 to build a bridge at a fixed price of $14 million. The bridge was to be completed by October 2013. Total cumulative costs incurred by the end of December 2011 and 2012 were $2 million and $6 million, respectively. Sunshine is unable to estimate the total costs of the project prior to completion. Final costs at the end of the project totaled $11 million. How much cost of sales will Sunshine report in 2013?

• A)$3,000,000
• B)$5,000,000
• C)$8,000,000
• D)$11,000,000

---

Definitions:

Volume Variance

A measure used in costing to indicate the difference between expected production volumes and the actual volumes produced, affecting costs.

Fixed Factory Overhead

Indirect, consistent costs associated with operating a manufacturing facility, such as salaries of supervisors and rent.

Normal Standards

The expected performance or cost levels under normal operating conditions, used for budgeting or measuring efficiency.

Ideal Standards

Benchmark or optimal performance levels set in managerial accounting to evaluate operational efficiency, without considering any business constraints.