right down to the inclusion of director’s remuneration should be classed as general overheads. Both general and site overheads are the essential costs incurred in the operation of the construction firm. When, during the time of tender, consideration is given to the way that overheads and profit are to be allocated, the result may be to spread both uniformly throughout the unit rates, or to apportion each against specific items. Looking at the way in which the construction firm apportions overheads and profits in a broader sense, the firm may attach percentages for both of these uniformly over all projects, or may apportion them against each individual project. Forecasts The budget is and is not adjusted, but it should be reviewed regularly and revised forecasts produced. During the forecast the original budget is re-evaluated; this involves examining each project as in the preparation of the original budget. Both the original budget and the revised forecasts are used to monitor the company’s performance. The next section looks in detail at the way in which performance of individual projects is monitored on a monthly basis by the use of cost / value comparisons or reconciliations. Data from the cost / value reconciliations is used in producing the revised forecasts of the budget. The data used for the revisions can be broken down into three main headings which are sub-divided as follows in figure 6.2, taken from Walker and Wilkie1. Cost Value Reconciliations To remind you, the term refers to the estimated and total expenditure incurred by ‘cost’ the contractor on a specific project, and includes all overheads associated with the project. The term refers to all costs as above plus the margin of profit. is the figure ‘value’ ‘Value’ paid by the client to the contractor following interim and final certification. Before the project begins, will be an analysis from the tender of the project in terms of: Net cost of production (NCP) Overheads Profit.
right down to the inclusion of director’s remuneration should be classed as general overheads. Both general and site overheads are the essential costs incurred in the operation of the construction firm. When, during the time of tender, consideration is given to the way that overheads and profit are to be allocated, the result may be to spread both uniformly throughout the unit rates, or to apportion each against specific items. Looking at the way in which the construction firm apportions overheads and profits in a broader sense, the firm may attach percentages for both of these uniformly over all projects, or may apportion them against each individual project. Forecasts The budget is and is not adjusted, but it should be reviewed regularly and revised forecasts produced. During the forecast the original budget is re-evaluated; this involves examining each project as in the preparation of the original budget. Both the original budget and the revised forecasts are used to monitor the company’s performance. The next section looks in detail at the way in which performance of individual projects is monitored on a monthly basis by the use of cost / value comparisons or reconciliations. Data from the cost / value reconciliations is used in producing the revised forecasts of the budget. The data used for the revisions can be broken down into three main headings which are sub-divided as follows in figure 6.2, taken from Walker and Wilkie1. Cost Value Reconciliations To remind you, the term ‘cost’ refers to the estimated and total expenditure incurred by the contractor on a specific project, and includes all overheads associated with the project. The term ‘value’ refers to all costs as above plus the margin of profit. ‘Value’ is the figure paid by the client to the contractor following interim and final certification. Before the project begins, will be an analysis from the tender of the project in terms of: Net cost of production (NCP) Overheads Profit.
Unit-6-P-L-Accountg.docx