Question: 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:

- Direct material costs                                                    £50,000

- Dirct labour cost                                                          £160,000

- Indirect labour cost                                                        16,000 hours

- Depreciation of machine                                              £25,000

- Rent and rates                                                           £8,000

- Heating, lighting and power                                         £10,000

- Machine time                                                             £5,000

- Indirect materials                                                       £2,000

- Other indirect costs                                                     £1,000

- Machine time                                                               3,000 hours

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 races. 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.