Abstract

One of the measures of ensuring profitability in the construction industry is application reliable costing technique(s). The study examined the impact of costing techniques on profitability of construction contracts. It sought and extracted data from a Bill of Quantities prepared by an Umuahia based firm to be used by an Aba based construction company where unit rates of concrete mixes of 1:2:4, 1:3:6 and 1:4:8 – 19mm aggregate were used. These unit rates were recalculated using traditional costing technique and activity-based costing technique with a view to determining if there would be any distortion in profitability of the construction project as a result of applying the two afore-stated costing techniques. The study found out that there were no significant distortion in profitability of the project as a result of costing techniques used. However, the study found out that activity-based costing technique is preferable based on other attributes outside profitability of the projects. Thus, the study recommended that construction companies should use both techniques as complements. The study also recommended that activity-based technique be used for tendering purpose to enable bidders incorporate overhead costs in clearer terms.