On Jan. 1, 2025, a contractor enters into a construction contract which includes a fixed contract price of 120M to build a bridge. The contractor's initial estimate of contract costs is 80M over a 3 year construction period. The contractor has a Dec. 31 year end.

On Dec. 31, 2025, the contractor's estimate of total contract cost is still 80M. However, by the end of 2026, the estimated contract costs increased to 100M, excluding the variations below:

 In 2026, the customer and the contractor agree to a variation resulting in an increase of contract revenue of 20M and estimated contract cost of 15M.

Actual cumulative costs incurred to the end of 2025, 2026, and 2027 (contract end) including the cost of variation are 30M, 71.05M, and 100.050M respectively.

At the end of 2025, 2026, and 2027 the customer paid the contractor PBs of 50M, 30M, and 42M respectively. 

Determine the RGP/(loss) for 2025, 2026, and 2027.

 

Answer rating: 100% (QA)

To determine the RGPloss for each year we need to calculate the Revenue Gross Profit and Recognized ... View the full answer