You employ Cheska, the owner of a sole trader gate replacement business, to do the job that you need for a new gate on your old home. Although Cheskas quote was the lowest you received, you picked her because she was highly recommended by your family. You were sure the low quote did not suggest a low-quality job. As it turned out, you were right.

Cheska works alone so you chatted with her during lunch breaks to keep her company. During one of these chats, you were surprised to hear that her business was struggling financially, even though Cheska had jobs booked 5 days a week for a year ahead, except for 4 weeks in summer when she wants to take a well-earned break. You thought about that low quote. Was she charging enough to cover all his costs?

The answer became clear when you received Cheskas invoice. It included the correct list of materials, all charged at appropriate, going-rate-in-the-market prices (total $10,000). No obvious problems there. It was the other item on the invoice labour that suggested a problem. Cheska had charged the correct amount of hours (total 80 hours = 8 hours per day, 5 days per week for 2 weeks) but at only $30 per hour! Clearly such a low rate could only be the direct labour rate. It seemed that no overheads had been incorporated into that rate, as would normally be the case for tradies. You guess Cheskas overheads would be around $50,000 per year.

You pay the invoice but then decide you want to help Cheska out by explaining how he could apply a job costing approach in the future.

In your explanation to Cheska, you will need to include the following:

a) A brief description of job costing and its purpose.

b) A definition of overheads along with 4 examples of overheads applicable to jobs for Williams business.

c) A numerical example applied to your roofing job that derives the full cost of your job. The example should correctly use the information above, provide any necessary formulas and justify any choices. The example should be well presented in a logical order that will be easy for William to follow and understand.

Your answer should not exceed 500 words.