Meaning of contract costing

meaning of contract costing

Contract (or terminal) costing, is one form of application of the principles of job order costing. In contract costing each contract is treated as a cost unit and costs are ascertained separately for each contract. It is suitable for business concerned with building or engineering projects or structural or construction contracts. read more

CVP analysis revision question 2 (NBAA, B5, NOV 2018)


The MAISHA is a medium sized theatre, with a maximum capacity of 500 seats, offering a variety of music events to its patrons.  In the past, the event offered were of low budget, featuring local and regional singers and musicians.   This year, the theatre engaged the services to music director who negotiated and booked two well known artists for event in May.  The MAISHA receives some funding to promote its activities from the Department of Culture and this fund is sufficient to pay basic operating expenses such as insurance, light and heat, and staff costs.  When a concert or event is staged, additional costs arise and the Board of Management of the theater must ensure that all such costs are covered by ticket sales.  While the artists that have been booked for May are nationally known, they charge higher fees to perform and the Board of Management are particularly concerned to ensure that the ticket price charged for the event is sufficient. read more

Standard costing and variance analysis revision question (NBAA, B5,NOV 2018)


Rorya Cakes Bakery makes a single product called Delicious Cakes. The company is using marginal costing to value its product. The company standard cost card for Delicious Cakes comes from the parent company called Rorya Oven headquartered in Malaysia, which contains the following: read more

Just in time (JIT) Revision question (NBAA, B5, NOV 2018)


MARINGA Video Company sells a package of blank videotapes to its customers all over Tanzania.   It purchases videotapes from MAYUNGA Tapes company at TZS.140,000 a package.   MAYUNGA Tapes Company pays all freight to MARINGA Video Company.   No incoming inspection is necessary because MAYUNGA Tapes  Company has a  superb reputation for the delivery of quality merchandise.    The annual demand of  MARINGA  Video  Company is  13,000 packages.  MARINGA Video Company requires 15% annual return on investment. The purchase order lead time is two weeks.  The purchase order is passed through the internet and it costs TZS.2000 per order.   The relevant insurance and material handling cost is TZS.3,100 per package per year. MARINGA Video Company has to decide whether to shift to Just In Time (JIT) purchase.   MAYUNGA Tapes Company agrees to deliver 100 packages of videotapes 130 times per year (5 times every two weeks) instead of the existing delivery system of 1,000 packages 13 times a year with an additional amount of TZS.20  per package.  MARINGA Video Co. will incur no stock out under its current purchasing policy.   It is however estimated that MARINGA Video Co. will incur stock out the cost on 50 videotape packages under a JIT purchasing policy.  In the event of a stock out, MARINGA Video Co. has to rush order tape packages which costs TZS.4,000 per package. read more