Question 1

Provision for increase in the contract price to accommodate increase in material and labour cost

Accepted Answer

An escalation clause in a contract allows for an increase in the contract price to accommodate increases in material and labor costs, ensuring that the supplier or contractor can cover their costs despite market changes.

Question 2

A contract in which the contractor is given the lost of work done plus a certain percentage for profit is called …………………….

Accepted Answer

A Cost Plus Contract is a type of agreement where the contractor is paid for all construction-related expenses (as approved or as might be reasonably incurred) plus an additional payment to allow for a profit.

Question 3

The person who gives the work on contract is known as ……

Accepted Answer

The person who gives the work on contract is known as the contractee. They are the party that hires another (the contractor) to perform a task or service.

Question 4

……….. is the portion of work certified not paid by the contractee till completion of the work

Accepted Answer

Retention money is the portion of the payment due to a contractor for work completed, which is held back by the contractee to ensure the contractor completes all aspects of their agreement satisfactorily. This is a common practice in construction contracts to ensure that any defects or issues can be rectified by the contractor.

Question 5

The work in the process of completion is known as …………….

Accepted Answer

Work in progress refers to the goods that are in the process of being manufactured but are not yet completed. This term is commonly used in accounting and inventory management to represent the value of the raw materials, labor, and overhead costs incurred for products that are not yet ready for sale.

Question 6

…………….. is the provision to increase the contract price increase in the Cost of construction over a particular level

Accepted Answer

An escalation clause is a provision in a contract that allows for an increase in the price of goods or services if certain conditions are met, such as increases in the cost of materials or labor. This is commonly used in construction contracts to account for potential increases in costs over time.

Question 7

Estimated profit on incomplete contract can also be called as ,……………..

Accepted Answer

Estimated profit on incomplete contracts is often referred to as notional profit because it is an estimated figure rather than an actual realized profit.

Question 8

A contract in which the price is fixed in advance is a ………….. contract

Accepted Answer

A fixed price contract is one in which the price is agreed upon in advance and does not change, regardless of the actual costs incurred by the contractor.

Question 9

A portion of the contact entrusted to somebody else is known as ……………..

Accepted Answer

A sub contract is when a portion of the contract work is assigned to another party by the primary contractor. This is common in various industries, including construction, where specialized tasks may be outsourced to subcontractors.

Question 10

A method of costing applied where costs are collected and accumulated for each work order is ………………….

Accepted Answer

Job costing is the method where costs are collected and accumulated for each specific job or work order, making it the correct choice for this description.

Question 11

The method of costing applied when articles are manufactured in definite batches is ………………………….

Accepted Answer

Batch costing is specifically designed for situations where goods are produced in batches or groups and each batch is treated as a cost unit. This method is applied when articles are manufactured in definite batches, allowing for the efficient calculation of the cost per batch.

Question 12

The number of units to be manufactured in one batch

Accepted Answer

Economic Batch Quantity (EBQ) refers to the optimal number of units to be produced in a single production run or batch to minimize costs.

Question 13

The method of job costing is applied

Accepted Answer

Job costing is applied in industries where products are manufactured or services are rendered based on specific customer orders, allowing for individual cost tracking per job. Engineering workshops typically operate on this model, customizing their work for each client.

Question 14

The method of batch costing is used in …………………

Accepted Answer

Batch costing is used in the manufacturing of medicines because it involves producing a specific quantity of identical items in a batch, which is common in pharmaceutical production.

Question 15

Job costing is ………………………….

Accepted Answer

Job costing is a method of costing used to determine the cost of specific jobs or orders, which are distinct and separate from each other.

Question 16

The method of costing applied in lathe is ………………….

Accepted Answer

Job costing is the method of costing applied in lathe operations because it involves costing for specific jobs or batches, which is characteristic of manufacturing processes like lathe work where each job can be distinct.

Question 17

The method of costing applied in cycle parts manufacturing is ………..

Accepted Answer

Batch costing is the appropriate method for cycle parts manufacturing because parts are often produced in batches, allowing for the efficient calculation of the cost per batch. This method is suitable for items that are not mass-produced but are manufactured in specific quantities or batches, like cycle parts.

Question 18

Job costing is applied when the product are of …………… nature

Accepted Answer

Job costing is applied when products are of dissimilar nature, as it allows for the detailed tracking of costs for each individual job or project, which is necessary when products are not uniform.

Question 19

Job costing can also be called as ……………….. costing

Accepted Answer

Job costing is also known as specific order costing because it involves ascertaining costs for each job or work order specifically undertaken according to customer requirements.

Question 20

For each job a …………………. Is given under job costing

Accepted Answer

In job costing, each job is assigned a distinct number to track costs and progress specific to that job.

Quiz 3: Contract Pricing and Costing Methods