a kitchen fitter works a 45 week year and for 36 hours per week he estimates that hi 611278

A kitchen fitter works a 45-week year and for 36 hours per week. He estimates that his overheads for the year will be £9,000.

When billing customers, the fitter may wish to include a fraction of his overall overheads into the cost of each ‘job’ he performs for customers and he does this on the basis of the time of each job completed. This means that jobs that take longer will incur a higher proportion of overheads. For example, for a job that takes 25 hours he would want to include the following amount of overheads into the cost of the job:

Hours worked in one year = 45 × 36 = 1,620

Given that the job takes 18 hours, he would apportion (18/1,620) × £9,000 = £100 of overheads for this job on top of the direct materials and his direct labour. The selling price charged for this job would be based on both the direct costs of the job and this £100 share of the overheads.