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.
Promptprint Ltd, a printing business, has received an enquiry from a potential customer for the
quotation of a price for a job. The pricing policy of the business is based on the plans for the
next financial year shown below.
A first estimate of the direct cost for the particular job is:
£Direct materials 4,000
Direct labour 3,600
Required:
(a) Prepare a recommended price for the job based on the plans, commenting on your method,
ignoring the information given in the Appendix (below).
(b) Comment on the validity of using financial plans in pricing, and recommend any improvements
you would consider desirable for the pricing policy used in (a).
(c) Incorporate the effects of the information shown in the Appendix (below) into your estimates
of the direct material cost, explaining any changes you consider it necessary to make to the
above direct material cost of £4,000.