How Depreciation Charged Contract Costing

How Depreciation Charged Contract Costing

There are there method of charging cost of plan to a contract.

1. Deprecation

The depreciation may be charged by using straight line or reducing balance method. both these method have predetermined rate of utilization and therefore site manager give little attention for careful utilization and maintenance of asset.

2. Book Value Difference

The book value difference is charged as depreciation. The book value at the start and at the end is calculated and the difference is charged as depreciation. The book value is determined by the condition of the plant. This method improve the responsibility of site manager for effective and careful utilization of asset.

3. Plant Account method

Depreciation and Repair and maintenance is charged to an account and then a notional rent is charged to contract on the bases of utilization.