Contract costing is one which is used for the works of civil- engineering nature. Here is the list of some of the features of contract costing –
1. All materials which are used for the purpose of completion of the contract is allocated to the debit side or charged to contract account.
2. Wages which are paid for the workers employed for the completion of the contracts are also allocated directly to the contract.
3. As far as indirect costs like salaries of engineers, lighting etc…., are concerned it is allocated on some reasonable basis such as direct labor hours or material used or some other basis which depends on company to company basis.
4. As far as treatment for the machinery used for the completion of contract is concerned, one can charge the depreciation amount of the machinery for the year to the contracts account.