JOB & CONTRACT COSTING

PROBLEMS ON JOB COSTING

1. The information given below has been taken from the records of an engineering works in
respect of job 303:
Materials Rs.5,020
Wages : Department A 60 hours at Rs.3 per hour
Department B 40 hours at Rs.2 per hour
Department C 20 hours at Rs.5 per hour
The work overheads are as follows:
Variable: Department A Rs.5,000 for 5000 labour hours
Department B Rs.3,000 for 1500 labour hours
Department C Rs.2,000 for 500 labour hours
Fixed expenses: Rs.20,000 for 10,000 working hours.
Calculate the cost of Job No.303 and the price for the job to earn a profit of 25% on the
selling price.

2. Prepare a Job Cost Sheet from the following information.

Materials Rs.4,010
Wages – Dept, A 60 hrs. at Rs.30 per hour
B 40 hrs. at Rs.20 per hour
C 20 hrs. at Rs.10 per hour
Overheads – Variable Rs.2 per hour
Fixed Rs.30,000 for 10,000 hours.
Calculate the cost of the Job in Job Cost Sheet and the price for the job to earn a profit of 25%
on the selling price.

3. A shop floor supervisor gives the data in respect of job as –

Per unit
Rs.
Materials 4010
Wages:
A 60 hours at Rs.3 per hour
B 40 hours at Rs.2 per hour
C 20 hours at Rs.5 per hour
Overheads estimated as-
Variable:
A Rs.5,000 for 5,000 hours
B Rs.3,000 for 1,500 hours
C Rs.2,000 for 500 hours
Fixed Rs.20,000 for 10,000 hours.
Profit 25% on price.
Prepare the Job Cost Sheet

4. The following information is taken from the records of an engineering works in respect of
Job.No.444.
Materials Rs.16,000
 Wages :
Department A- 150 hours at Rs.5 per hour
Department B- 120 hours at Rs.4 per hour
Department C- 60 hours at Rs.8 per hour
Work overheads are as follows:
Variable :
Department A- Rs.10,000 for 4000 labour hours
Department B- Rs.6,000 for 3000 labour hours
Department C- Rs.4,000 for 500 labour hours.
Fixed overheads – Rs.20,000 for 10,000 working hours.
Calculate the cost of Job No.444 and what price should be quoted for the job if a profit of
25% on selling price is maintained?

5. The following information has been taken from a factory:

Rs.
Materials 5,00,000
Direct wages 4,00,000
Factory overheads 3,00,000
Office and Administrative overheads 2,00,000
You are required to prepare a statement showing the selling price of a machine costing
Rs.42,000 in materials and Rs.30,000 in wages, so that it yields a profit of 25% on the selling
price. Factory overheads are absorbed as a percentage on Direct wages and office and
Administrative overheads as a percentage on works cost.

PROBLEMS ON CONTRACT COSTING

:
1. A firm of building contractors began to trade on 1st April 2020. The following was the
expenditure on a contract for Rs.3,00,000.
Rs
Materials issued to contract 51,000
Plant 15,000
Wages 81,000
Other expenses 5,000
Cash received on account to 31st March 2021 amounted to Rs.1,28,000 being 80% of work
certified. Of the plant and materials charged to contract, plant which cost Rs.3,000 and
materials which cost Rs.2,500 were lost. On 31st March 2021 plant which cost Rs.2,000 was
returned to stores, the cost of work done was uncertified was Rs.1,000 and materials costing
Rs.2,300 were in hand on site. Charge 15% of depreciation on plant, reserve ½ profit received
and prepare Contract A/c. from the above particulars.

2. Gangaram construction limited undertook a number of contracts during 2020. Following

particulars are available as regards the construction of a canteen building:
Rs.
Materials at site on 1-1-2020 2,000
Materials purchased 50,000
Materials supplied for stores 10,000
Materials returned to stores 1,000
 Materials costing Rs.2,000 were stolen.
Materials worth Rs.200 destroyed by fire
Materials costing Rs.1,000 were sold for 800
Materials in hand at the end of the year 10,000
Materials received from hospital contract
which was completed 20,000
Materials transferred to cinema contract 500
Plant issued to the contract on 1-1-2020 50,000
Plant returned to store 1,000
Plant worth Rs.2,000 sold for 2,500
Plant worth Rs.500 was stolen
Plant worth Rs.300 was destroyed by an accident
Plant in hand at the site at the end of the year was Rs.10,000.
Show how these transactions will appear in a Contract Account.

3. A Co. of builders having an authorized capital of Rs.1,00,000 divided into 1,000 ordinary
shares of Rs.100 each, commenced operations on 1st Jan.2022 and during the year was
engaged in a contract, the contract price being Rs.4,00,000. the Trial Balance extracted from
their books on 31st Dec. 2022 stood as follows:
Rs. Rs.
Share Capital being 80% paid up 80,000
Sundry Creditors 8,000
Land & Building at cost 34,000
Cash at bank 9,000
Materials 80,000
Plant 15,000
Wages 1,05,000
Expenses 5,000
Cash received being 80% of work certified _________ 1,60,000
2,48,000 2,48,000
Of the plant and materials charged to the contract, plant costing Rs.2,000 and material costing
Rs.2,000 were destroyed by an accident. On 31st December, 2022 plant which cost Rs.4,000
was returned to store, value of materials on site was Rs.4,000; cost of work done but not
certified was Rs.2,000. Charge depreciation at 10% on plant and carry to Profit and Loss
account 2/3 of profit. Prepare the contract Account for the year 2022 and the Balance Sheet
on 31ts Dec.2022 and show your calculations of the amount to be certified to Profit and Loss
Account.

4. A company of contractors began to trade on 1st January 2021. During 2021 the company was
engaged on only one contract of which the Contract price was Rs.5,00,000.
Of the plant and materials charged to the contract, plant costing Rs.5,000 and materials
costing Rs.4,000 were lost in accident.
On 31st December 2021, plant costing Rs.5,000 was returned to stores cost of work
uncertified, but finished Rs.2,000 and materials costing Rs.4,000 were in hand on site. Charge
10% depreciation on plant. Compile Contract A/c and Balance Sheet from the following:
Rs. Rs.
Share capital 1,20,000
Creditors 10,000
 Cash received (80% of work certified) 2,00,000
Land and building 43,000
Bank balance 25,000
Charged to contract:
Materials 90,000
Plant 25,000
Wages 1,40,000
Expenses 7,000 ________
3,30,000 3,30,000

5. The Gujarat Engineering Company Limited has undertaken the construction of a bridge. The
following particulars relate this work for the year ended 31.12.2021.
Rs.
Materials :
Direct purchase 1,00,000
Issued from stores 20,000
Wages 90,000
General plant in use (written down value) 2,00,000
Depreciation thereon 20,000
Direct Expenses 7,000
Share of general overhead 4,000
Materials on hand (31.12.2021) 2,000
Materials lost by fire 1,000
Salvage value thereon 300
Wages accrued (31.12.2021) 10,000
Direct Expenses accrued 1,000
Value of work certified 3, 18,000
Value of uncertified work 9,000
The value of the contract was Rs.4,30,000 and it is a practice of the contractee, as per the
terms of the contract, to retain 10% of the work certified.
From the above particulars prepare the following:-
i) Contract Account
ii) Showing how the items would appear in the Balance Sheet.

6. In the books of a contractor the following information is found:

2022 July 31: Rs.
Materials issued to site 6,000
Plant issued to site 10,000
Direct labour 4,600
Indirect labour 635
Overhead expenses 1,950
Wages accrued 1,500
Value of the work certified for payment Rs.12,000.Cash received from contractee Rs.9,600.
Cost of Work Uncertified: Rs.4,000
Stock of materials not used: Rs.1,050. Depreciation of plant at 10%
Show the contract account taking 2/3 for the profits on contract in progress. Also show the
relevant entries in the Balance sheet.
7. A firm of building contractors undertook the contract no.777 in 2021, the contract price of
which was rs.6,00,000.
Following particulars are available for contract no.777.
Rs.
Materials issued from stores 1,50,000
Materials purchased for the contract 30,000
Materials transferred from contract
No. 750 to this contract 10,000
Plant installed at cost 70,000
Wages paid 2,40,000
Architect’s fees 12,000
Establishment charges 10,000
Direct expenses paid 8,000
Wages accrued on 31-12-2021 4,000
Direct expenses due on 31-12-2021 5,000

Of the plant and materials charged to the contract, plant costing Rs.5,000 and materials
costing Rs.4,000 were lost by an accident. Some part of the materials costing Rs.2,500 were
sold at a profit of Rs.500. On 31-12-2021 plant which cost Rs.3,000 was transferred to
Contract No.761.
On 31-12-2021 the value of work certified was Rs.4,80,000 and 80% of the same was
received in cash. The cost of work done but not certified as on this date was Rs.3,000. Charge
depreciation on plant at 10%. You are required to prepare contract no.777 for the year ended
31-12-2021 by transferring to the profit which you consider reasonable. Also prepare the
balance sheet of the firm.

8. A company of contractors began to trade on 1st Jan. 2021. During the year 2022 it was
engaged on only one contract of which the contract price was Rs.20,00,000.
Of the plant and materials charged to the contract plant costing Rs.20,000 and materials
costing Rs.16,000 were lost in an accident.
On 31st Dec.2022 plant costing Rs.20,000 were returned to stores. Cost of work done but not
certified was Rs..8,000 and materials costing Rs.10,000 were in hand on site. Charge 10%
depreciation on plant and prepare Contract Account and Balance Sheet from the following.
Rs. Rs.
Share capital - 4,80,000
Creditors - 40,000
Cash received (80% of work cerified) - 8,00,000
Land and buildings 1,72,000
Bank Balance 1,00,000
Charged to contract:
Materials 3,20,000
Plant 1,00,000
Wages 5,60,000
Architects fees 10,000
Expenses 58,000 ________
13,20,000 13,20,000
9. The following is the summary of the entries in a contract ledger as on 31st Dec. 2021 in
respect of contract No.666
Rs.
Materials issued from stores 1,00,000
Materials purchased for the contract 90,000
Plant installed at cost 70,000
Wages 2,00,000
Direct Expenses 20,000
Central Office expenses 13,000
Contract price 10,00,000
Work certified 4,80,000
Cash received on contract 3,84,000
Work uncertified 2,000

Additional information:
1. Accruals on 31st Dec.2021 were wages Rs.80,000, direct expenses Rs.5,000.
2. Rs.4,000 worth plant and Rs.3,000 worth of material were destroyed by fire.
3. Some of material costing Rs.4,000 were sold for Rs.5,000.
4. On 31st Dec. 2021 the plant which cost Rs.1,000 was returned to stores. A
part of the plant which cost Rs.400 was damaged rendering itself useless.
5. Charge depreciation on plant at 10% p.a.
Prepare Contract Account and show the entries in the Balance Sheet as on 31 st. Dec. 2021

10. Following is the summary of the entries in a contract ledger as on 31st Dec. 2020 in respect of
contract No.51.
Rs.
Materials bought directly 35,000
Materials issued from stores 7,000
Wages 18,000
Direct expenses 7,000
Establishment Charges 8,000
Plant 34,200
Scrap sold 1,820
Sub Contracts cost 8,180

The further information is as follows:

1. Accruals on 31st Dec. 2020 were wages Rs.900 and direct expenses Rs.1,200.
2. Included in the above summary of entries are: wages Rs.1,000 and other expenses
Rs.1,500 since certification. The value of materials since certification is Rs.2,600.
3. Rs.2,000 worth plant and Rs.3,000 worth materials were destroyed by fire.
4. Rs.4,000 worth of plant sold for Rs.3,000 and materials costing Rs.5,000 sold for
Rs.6,000.
5. Depreciation till 31 st Dec. 2020 on Plant Rs.10,000.
6. Materials at site Rs.5,000
7. Cash received from contractee Rs.60,000 being 80% of work certified.
8. Contract Price Rs.1,00,000
Show Contract Account and the relevant items in the Balance Sheet.
11. The contract ledger of M/s Honest Construction Ltd. revealed the following expenditure on
account of Contact No.111 on 31.12.2001.
Rs.
Materials – direct purchase 1,10,000
Plant 70,000
Materials issued from stores 50,000
Materials transferred from Contract No.51 25,000
Wages paid 2,70,000
Cost of subcontracts 25,000
Wages Accrued (31.12.2001) 23,000
Establishment Charges 10,000
Direct Expenses 15,000
Materials transferred to Contract No.75 10,000
Scale of Scrap 5,000
Sundry Expenses 15,000
The contract was begun on 01.01.2001 for a contract price of Rs.10,00,000. Cash received to
date was Rs.4,80,000 representing 80% of work certified. The value of the plant on
31.12.2001 was Rs.20,000 and the value of materials at site was Rs.6,000. The cost of work
finished but not certified on this date was Rs.50,000 Some of the materials costing Rs.20,000
were found unsuitable and were sold for Rs.16,000 and a part of the plant costing Rs.5,000
was found unsuitable and was sold at profit of Rs.1,000. In order to calculate the profit made
on the contract to 31st December, 2001 the contractors estimated further expenditure that
would be incurred in completing the contract and took to credit of P/L Account for the year
that proportion of the estimated net profit to be realised on the contract which the value of
work certified before to the contract price.
The estimates were as under:
a) That the contract would be completed by 30th June 2002.
b) That a further sum of RS.30,000 would have to be spent on plant and its
residual value on the completion of the contract would be Rs.12,000.
c) That the materials, in addition to those at site on 31.12.2001; would cost
Rs.1,00,000 and that further sundry expenses of Rs.7,000 would be incurred.
d) That the wages on contract for 6 months would amount to Rs.1,69,900.
e) That the establishment charges would cost the same amount per month as in
the previous year.
f) That a reserve of Rs.18,000 would be provided for meeting contingencies.
Prepare Contract A/c. No.111 for the year ended 31.12.2001 and show your calculations of
the profit to be credited to P/l A/c. for the year.

12. A Contractor secured a contract to supply and erect machinery for the sum of Rs.7,50,000. He
was to receive payments on account from time to time equal to 90% of work certified. He
commenced work on 1st January 2021 and incurred the following expenditure during 2021
Plant and tools Rs. 70,000
Machinery and stores Rs.2,00,000
Wages Rs.1,50,000
Sundry Expenses Rs. 30,000
Establishment Charges Rs. 40,000
A part of machinery costing Rs.20,000 was unsuited to the contract and was sold immediately
at a profit of Rs.5,000. the value of Plant and Tools on 31.12.2021 was Rs.40,000 and the
value of machinery & stores then in hand Rs.30,000 – Cash received was Rs.4,38,750
representing 90% of work certified. In order to calculate the profit made to the contract upto
31.12.2021 the contractor estimated the further expenditure that would be incurred for
completing the contract and took to the credit of Profit & Loss Account for the year that
proportion of estimated profit to be released to the contract which the certified value of work
done bore to contract price. He estimated:
II. That the contract would be completed in a further period of 6 months.
III. That plant and tools would have a residual value of Rs.10,000 upon the completion
of the contract.
IV. That the cost of machinery and stores required in addition to those in stock on
31.12.2021 would be Rs.1,00,000 and that sundry expenses Rs.20,000 would be
incurred.
V. Wages for the 6 months would be Rs.80,000.
VI. Establishment charges would cost the same per month as in the previous year.
VII. That 2 ½% of the total cost of the contract (excluding this %) should be provided for
contingencies.
Prepare Contract A/c. for the year ended 31.12.2021and show your calculation of profit to be
credited to P & L A/c. for the year.

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