the project in problem 10 is expected to take 9 months to complete. the costs fo

Question

the project in problem 10 is expected to take 9 months to complete. the costs for the project at the end of the second month are shown in figure 4-15. you have a meeting with project's owner to discuss the financial status of the project. using the committed cost worksheet from problem 10, update the estimated cost at completion and determine if the project is over or under budget. the supervision and temporary utility costs should be prorated over the life of the project. the pouring of the footing, foundations, and floor slab are complete. ( question from construction accounting and financial management, steven j.peterson, third edition).

for figure 4-15 refer http://www.chegg.com/homework-help/questions-and-answers/construction-accounting-changes-made-landscape-work-beern-mlbcontracted-37500-landscaping--q23930647

Explanation / Answer

The cost of the project is 346,600 $ for 9 months which includes consultant fee of 32000 $ also.

If we calculate for 2 months , the amount of work which shall be done will be as under = (346,600 x 2)/9

= 77022 $

Now , the work done for 2 months(by table 4-15)= 67175 $

It clearly states that it is over budget by = (77022-67175)

= 9847 $

So, increased cost per month = 9847/ 2

= 4923.5 $

Initial cost per month during budget preparation = 346600/9

= 38511.1 $

Percentage cost increase = (4923.5/ 38511.1) x 100

= 12.78%

So the budget will increase by =( 346600 x 12.78)/100

= 44311.51 $

The new budget amount will be = 346600 + 44311.51

= 390911.51 $

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