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.