Question: Suppose that Marine Suppliers Ltd used a machine hour basis of charging overheads to jobs. What would be the cost of the job detailed if it was expected to take 5 machine hours (as well as 12 direct labour hours)?

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?