Question

What methods are used in practice to determine the extent of progress toward completion? Identify some “input measures” and some “output measures” that might be used to determine the extent of progress.

Short answer

The cost-to-cost approach and the units-of-delivery method are used to determine the level of progress toward completion.

Step-by-step solution

Definition of Percentage-of-Completion Method

As a corporation approaches the end of a long-term contract, the percentage-of-completion technique measures revenues, expenditures, and gross profit. Deferring recognition of these items till the end of the contract distorts the efforts (costs) and successes of the accounting periods (revenues).

Methods used to determine the extent of progress towards completion and some input & output measures used

The units-of-delivery technique and the cost-to-cost methodologyare used to calculate the progress toward completion. Costs and work hours are input measurements, whereas tonnage produced, stories erected in a building, and miles of roads finished are output metrics. All of these tactics aimto quantify progress in terms of costs, units, or value-added.