Ican 2026 Public Sector Accounting And Finance Question 6

Option A - Direct labour The direct labour option which expects the project to be completed within six months from commencement, involves the following: N’000 Cost of direct materials 340,000 Cost of hired supplementary labour 120,000 Cost of fuel, lubricants and stationery specially for the project 60,000 Estimated cost of repairs of vehicles, plants and equipments to execute the project 240,000 Estimated incidental costs (job specification. bill of quantity etc.) 40,000 Total anticipated costs 800,000 If the project is executed by direct labour, some materials worth N90million would be conserved. The engineers have estimated the un-expired vehicle repair cost as N96million, at the end of the project execution.

Option B – Contract award: The contract award fee is N780million. Other relevant costs are: N’000 Cost of job specification, bill of quantity etc. to be paid for separately by the State 40,000 Cost of advertisement inviting public tenders 20,000 Total 60,000 The contractor has agreed to finance and complete the project within five months of commencement and allow delayed payment up to three months. If the project is executed through contract award, the state government can invest the estimated savings under direct labour option in a short-term deposit account at an annual rate of 15% up to the time the contract payment is due. The costs of job specification, bill of quantities and advertisement as in option A remain constant.