Pieman Products Ltd makes road trailers to the precise specifications of individual customers.

The following are predicted to occur during the forthcoming year, which is about to start:

All direct labour is paid at the same hourly rate.
A customer has asked the business to build a trailer for transporting a racing motorcycle to race meetings. It is estimated that this will require materials and components that will cost £1,150. It will take 250 direct labour hours to do the job, of which 50 will involve the use of machinery.

Required:
Deduce a logical cost for the job and explain the basis of dealing with overheads that you propose.

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Direct materials cost Direct labour cost Direct labour time Indirect labour cost Depreciation of machine Rent and rates Heating, lighting and power Indirect materials Other indirect cost (overhead) elements Machine time 50,000 160,000 16,000 hours 25,000 8,000 10,000 5,000 2,000 1,000 3,000 hours