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.