Which is not listed as a major method for determining percentage of completion?

Which is not listed as a major method for determining percentage of completion?

• A. Efforts - expended
• B. Units of work performed
• C. Physical completion method
• D. Cost to cost

Answer: (A)

The concept here is how to gauge progress on long-term contracts in order to recognize revenue fairly. The reliable ways to measure how much of a contract is complete are objective progress indicators: cost-to-cost (costs incurred to date divided by total estimated costs), units of work performed (units completed divided by total units), and the physical completion method (the actual physical progress of the work). Efforts expended—tracking how many hours or amount of labor has been spent—is not a major method because hours don’t always align with how much of the contract is actually finished. People can spend a lot of time on rework, idle labor, or activities that don’t translate into completed work, which can distort progress if used as the sole measure. Therefore, the efforts expended approach isn’t considered a standard method for determining percentage of completion.

The concept here is how to gauge progress on long-term contracts in order to recognize revenue fairly. The reliable ways to measure how much of a contract is complete are objective progress indicators: cost-to-cost (costs incurred to date divided by total estimated costs), units of work performed (units completed divided by total units), and the physical completion method (the actual physical progress of the work).

Efforts expended—tracking how many hours or amount of labor has been spent—is not a major method because hours don’t always align with how much of the contract is actually finished. People can spend a lot of time on rework, idle labor, or activities that don’t translate into completed work, which can distort progress if used as the sole measure. Therefore, the efforts expended approach isn’t considered a standard method for determining percentage of completion.