Creation Construction Company (CCC)has Contracted to Build an Office Building

question 47

Essay

Creation Construction Company (CCC)has contracted to build an office building for Property Corp. The construction started on January 1, 2021, and the project was completed on July 1, 2024. The contract price was $70 million. Due to uncertainties in the construction process, the two parties to the project agreed to a risk-sharing arrangement whereby Property Corp. covers 50% of all cost overruns in excess of the originally estimated cost of $65 million (e.g., if estimated total costs are $69 million, then CCC would receive an additional $2 million for the contract). The following data relate to the construction period.
$$\begin{array} { | l | r | r | r | r | } \hline & 2021 & 2022 & 2023 & 2024 \\\hline \text { Costs incurred to date } & 16,500 & 42,900 & 56,100 & 69,000 \\\hline \text { Estimated costs to complete } & 49,500 & 35,100 & 9,900 & 0 \\\hline \text { Billings during the year } & 24,000 & 38,600 & 61,600 & ? ? ? ? \\\hline \text { Collections during the year } & 19,000 & 35,100 & 58,100 & 68,500 \\\hline\end{array}$$ Required:
Calculate the estimated gross profit (loss)for 2021, 2022, 2023, and 2024, assuming that the percentage of completion method is used.

Identify the effects of wage changes on labor markets and associated industry input costs.

Comprehend the importance of input markets and their relation to output markets.

Evaluate the effects of shifts in demand and supply on resource allocation and industry costs.

Understand the concept of Pareto Optimality and efficiency in market outcomes.

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Definitions:

Contaminated Tissue

Biological tissue that has been exposed to pathogens, chemicals, or radioactivity, posing a risk of infection or harm.

Foreign Matter

Unwanted substances or materials found within a product, which can include anything from contaminants to debris.

Bandage Material

Fabric or other material used to support or bind a wound or to protect an injured part of the body.

Gauze

A thin, translucent fabric with a loose open weave used in medical dressing, for wound care, and in surgical procedures.