NUST INSTITUTE OF MANAGEMENT SCIENCES

MANAGERIAL ACCOUNTING

FINAL TERM PROJECT

Submitted To

Mr. Sabir Jafri

Submitted By

Abbas Kazim Shah

Anila Muhammad

Fatima Syed

Muneeb Ahmed Khan

Sadaf Mansoor

Syed Usman Wazir

Batch

BBA-2K5 (B)

Submission Date:

January 25, 2008

Acknowledgements

We would like to pen our gratitude to the support and guidance provided to us for the

completion of our project.

First and foremost, we would like to thank God Almighty. By His grace and

blessings, we were able to complete the project successfully.

Also, we are greatly thankful to Ms. Fatima Ayaz (Architect), Maj ® Shaukat

Mehmood (Property Consultant), Mr. Musharraf (Contractor), Mr. Ahmed Mirza

(Contractor) & a host of other shopkeepers. We are highly obliged and would like to

thank them for providing us with all the relevant information for our project. Needless

to say, without their cooperation it would have been very difficult for our project to

materialize.

For putting up with occasional limited accessibility and mood swings, and for always

being there for moral support and encouragement, our special thanks go to the most

important people in our lives - our parents.

We would also like to thank our course instructor, Mr. Sabir Jafri for his perpetual

support and guidance throughout our project work. Without his assistance it would

have been impossible to complete the designated task.

Executive Summary

For our term project of Managerial Accounting, we were required to give the cost of

construction of a house and give a competitive bid conforming to the current market

trends.

Our group undertook this project, by conducting market research of the prevalent

rates and trends. We divided our project into three parts i.e. obtaining multiple

(competitive) rates from different contractors and suppliers, selecting the best options

and giving a competitive bid.

The costs in our project, for coming up with the final bid price, were divided into four

segments. Plot price and architect fee formed the first two segments. Contractor cost

and material costs formed the third and fourth segment.

Finally, our group was able to reach a conclusive bid price of Rs. 9,780,246 for

the construction of an unfurnished house.

Specifications Demanded By The Customer

Following are the specifications of the house demanded by the customer:

Basic requirements

1 Kanal plot in DHA Islamabad 5 Bedrooms with attached washrooms (including 1 master bedroom) 2 Kitchens 1 Drawing room 1 Dining room 2 T.V lounges 2 Store rooms 1 Servant quarter Terrace Porch

Utilities & Accessories

Geyser Heaters AC’s Cooking range

Note

The customer demanded that the house should be of ‘A’ or ‘B’ category. These

categories imply the use of imported material or very high quality Pakistani material.

BID For

House

Bid For Construction Of House

It is being notified that our group presents the following bid for the construction of a

house, according to the requirements provided by the buyer.

BID PRICE : Rs. 9,780,245

Specifications

1 kanal house (90’x 50’) Covered area of 4988 square feet

Specifications Of The House

Giving the cost structure of the house, our group not only took into consideration the

requirements of the customer/ buyer but also ensured that the cost provided should be

of a good quality house, suitable for the posh locality selected. Following

specifications of the house are important to mention, to give an insight into the main

elements of the house.

The proposed construction site is Plot No. 3, Street 4, Phase 1 extension, DHA Islamabad.

The dimensions of the plot are 50’ x 90’. The total covered area of the plot is 4988 square feet.

It is pertinent to mention here that the costs taken for the proposed construction of the

house may seem relatively high, but this is due to the use of high quality materials, as

demanded by the customer.

The relevant cost details for the house are being presented in the attached sheets.

Notes to the financial statements

1. The statements have been prepared in accordance with the knowledge obtained from the course of accounting.

2. We have divided the overall costs into three categories namely Direct Materials (DM), Direct Labor (DL) & Manufacturing Overhead (MOH). The head of MOH does not include the indirect material costs because of the fact that all the material costs are accounted for in the direct material costs for the reason that we are providing a finished product to the customer/buyer. These materials come as a part of the package being provided to the customer based on his specification, therefore, do not count as indirect material costs.

3. The profit margin of 10% has consensually been decided by our group keeping in view the current market trends.