Question: Marine Suppliers Ltd undertakes a range of work, including making sails for small sailing boats on a made-to-measure basis.
The business expects to incur the following costs during the next month:
- Direct labour costs £60,000
- Dirct labour time 6,000 hours
- Indirect labour cost £9,000
- Depreciation of machinery £3,000
- Rent and rates £5,000
- Heating, lighting and power £2,000
- Machine time 2,000 hours
- Indirect materials £500
- Other misceallaneous indirect costs £200
- Direct material costs £3,000
The business has received an enquiry about a sail, and it is estimated that the sail will take 12 direct labour hours to make and will require 20 square metres of sailcloth, which costs £2 per square metre. The business normally uses a direct labour hour basis of charging overheads to individual jobs. What is the full cost of making the sail?