A Company Began Work on a Government Contract at the Start

question 93

Essay

A company began work on a government contract at the start of 2007. The contract was to construct a special building for $4,000,000. In making the bid, construction costs were estimated to be $3,000,000. Data during the construction period was: $\begin{array}{|l|l|l|}\hline &2007&2008\\\hline \text { Costs incurred this year } & \$ 600,000 & \$ 2,550,000 \\\hline \text { Estimated cost to complete as of } 12 / 31 & 2,400,000 & -0- \\\hline \text { Billings to the government during the year } & 720,000 & 3,280,000 \\\hline \text { Cash collected during the year } & 500,000 & 3,500,000 \\\hline\end{array}$ How much income on the contract would be reported for each year assuming:
(a) Completed contract method?
2007: $______________ 2008: $_______________.
(b) Percentage-of-completion method? (basis: estimated costs to complete)
2007: $________________ 2008: $_______________.

Analyze and calculate variable manufacturing overhead variances, including rate and efficiency variances.

Calculate and interpret direct labor variances, including rate and efficiency variances.

Determine the impact of actual direct labor hours and rates on standard costing.

Understand the concept of applying fixed and variable overhead based on standard activity bases.

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Definitions:

Motivating Factors

Elements or conditions that induce an individual to act or perform in a certain manner, driving engagement and effort.

Invent New Options

The creation of additional alternatives or possibilities to enhance decision-making or problem-solving.

Interdependent

A situation or relationship where parties are mutually reliant on each other, such that the actions of one affect the outcomes for the other.

Trust

Reliance on the integrity, strength, ability, or surety of a person or thing; confidence.