Features Of Contract Costing

The costing method used to determine the total cost of construction work is known as contract costing.

Following are the main features of contract costing:

1. Separate Account

A separate contract account is maintained for each contract.

2. Cost Unit

Each contract is considered as a cost unit.

3. Contract Site

A major portion of contract work is done at the contract site.

4. Direct Expenses

Expenses incurred at the contract site are considered to be direct expenses.

5. Overheads

Establishment expenses like head office, central store department are treated as overhead expenses. These overheads are recovered either based on the material consumption ratio, labor cost ratio, labor hour ratio or the value of material or labor consumption ratio.

6. Limited Contracts

Number of contract works with a contractor may not be very large.

Related Topics
Concept And Meaning Of Contract Costing
Concept Of Contract Account
Concept Of Work Cost Or Contract Cost
Concept Of Work-in-Progress Value In Contract Account

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