Cost Accounting in Organisational Context Cost Estimation Lecture Example A company has a contract to produce a new product which calls for orders of: 1. 200 units 2. 300 further units 3. 300 units further to these Cost Details Direct Materials: 10/unit with 10% discount applying to all units over 400 Direct Labour: The first batch of 100 units will take 450 hours. An 80% learning curve will apply after this. The labour rate is 10 per hour. Variable Production Overhead: 50% of direct labour cost Selling & Admin O/H and profit: 35% of selling price Set order prices if : i) All orders are certain (i.e. average prices) ii) Only order I is certain. Both orders 2 & then 3 may be cancelled (i.e. incremental pricing)