Wekusko Ltd. (Wekusko) is a large construction engineering company. In 2016, Wekusko was awarded a contract to build a small hydroelectric generating plant adjacent to an aluminum smelting plant. The aluminum company decided that it would be cheaper to generate its own power than to buy power from a supplier, so it is having a generating plant built. Wekusko will receive $31,000,000 to build the dam, from which it must pay the costs of construction. Information regarding the yearly progress of the contract measured in different ways is provided below:
Wekusko's new vice-president of finance understands that there are different ways to calculate the percentage-of-completion of a project. The vice-president has asked you to calculate the amount of revenue that would be recognized in each year of the contract using three different methods of estimating the percentage completed:
a. Costs incurred.
b. Percentage completed in each year as estimated by an independent engineering expert.
c. Labour hours worked.
The vice-president would also like you to explain how he should choose among the three methods and which method would provide the best indication of the progress of the project to external stakeholders.