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# AS 7 Query (Escalation Clause)

Why isn't the further estimated cost also to be increased by 5% in this question? I.e. from 6 cr to 6.3 cr

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Kumarjit Dey

CA Inter

4K+

15-Nov-20

42

Because when it is given as cost estimated to complete the contract( latest number) it is assumed that it already includes escalation. If the same amount had been computed long time ago, then there is a chance that it also needs to be escalated but in this question the computation is latest

So you mean to say that suppose rs 6 cr (which is the latest number) was not given, we would have to first subtract 4 cr from 9.5 cr (which is supposedly the initial estimate) and then add Escalation %age to 5.5 cr.

Kumarjit Dey

CA Inter

4K+

15-Nov-20

Because when it is given as cost estimated to complete the contract( latest number) it is assumed that it already includes escalation. If the same amount had been computed long time ago, then there is a chance that it also needs to be escalated but in this question the computation is latest

Sriram Somayajula

15-Nov-20

Sales