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    Question

    Contract Accounts takes and captures which among the

    following costs?
    A Direct cost related to Material used in the contract Correct Answer Incorrect Answer
    B Direct cost related to Labour used in the contract Correct Answer Incorrect Answer
    C Indirect cost related to the contract Correct Answer Incorrect Answer
    D Both a and b Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    If the contract used some of the indirect expenses that are incurred not specifically for the contract, then on the basis of the consumption of these expenses, the indirect costs will be absorbed into the contract. Example the rent paid for the store house is 5000 units and for the contract, the contractor kept 2000 units in the store, then (2000/5000) = 40% of the rent will be absorbed on the contract.

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