Eye for Detail is an interior decorating firm located in Sydney. The following costs were incurred in the firm’s contract to redecorate the local council offices:
Direct material…………………………………..$5600
Professional labour……………………………..12,000
The firm’s budget for the year included the following estimates:
Budgeted overhead…………………………$800,000
Budgeted professional labour………………..500,000
Required:
1. Calculate the total cost of the firm’s contract to redecorate the council offices. Overhead is applied to contracts using a predetermined overhead rate, calculated annually, based on the professional labour cost. Materials are charged directly to each contract.
2. Use the total cost to calculate a service fee, assuming that the company adds a 4c) per cent profit margin to total cost.
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