In: Finance
2. A contractor has a contract to remove and replace the
existing landscape and
sidewalks around an office building. The work includes demolition
of the
existing landscaping and sidewalks, importing fill and grading
around the
office building, constructing new concrete sidewalks, and new
landscaping.
The contractor uses the cost codes in Figure 2-6. The original
estimate for the
demolition was $30,000 and a $5,000 change order has been approved
to
remove some unexpected debris found during the demolition.
The
demolition work has been completed at a cost of $33,562. The
original
estimate for the fill and grading was $17,500 and a $2,000 change
order for
importing additional fill to replace the debris has been approved.
The fill and
grading costs to date are $17,264 and the cost to complete has
been
estimated at $2,236. The original budget for the labor to pour the
concrete
was $19,200 and no changes have been made. The concrete labor has
been
subcontracted out for $19,200, for which the contractor has
received a bill
for $15,200. The original budget for the concrete for the sidewalks
was
$9,900 and no changes have been made. The contractor has spent
$7,425 for
concrete and estimates that $1,950 of concrete will be needed to
complete
the project. The original estimate for the landscaping was $37,500
and no
changes have been made. The landscape work has been subcontracted
out for
$37,500. The landscaping work has yet to start and no bills have
been
received. Determine the total estimated cost at completion for the
project
and the variance for each cost code.
6. Create a spreadsheet to solve Problem 2.
Here we are given various costs involved in contractor work which is accordingly shown in the spreadsheet ,Please see the attached spreadsheet .
The formula used for calculating variance is as follows :
Variance = ( Estimated cost - Actual Cost )
Cost variance (CV), is the difference between the actual cost and the budgeted (estimated) cost, or in other words the cost what we expected to spend difference the actual cost.