The South African company DT Constructers has been carrying out work on a number of building contracts including contract X over the six-month period ended 30 June 2017. The following information is available:

The South African currency is the rand, denoted as ZAR. Contract X commenced on 1 September 2016. As at 30 November 2016 cumulative costs on the contract, held in work-in-progress, totalled £2.126m (including overheads). DT Constructers predicts that further costs after 30 June 2017 to complete Contract X on time including overheads will not exceed ZAR1.874m. Overheads incurred over the six-month period to 30 June 2017, which are to be apportioned to individual contracts, are:

Required
1. (a) Allocate overheads to Contract X for the six-month period to 30 June 2017 (to the nearest ZAR000 for each overhead item).
(b) Determine the expected profit/loss on Contract X, and the amount of profit/loss on the contract that you recommend be included in the accounts of the company for the six-month period to 30 June 2017. 

2. DT Constructers is introducing a service costing system into its stores operations department. Outline the key factors to consider when introducing the service costing system.

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Number of contracts worked on in the six months to 30.06.17 Value Duration (average 11 months) Contract months Direct labour costs in the period Raw material costs in the period Distance from base (average) Value of work certified at 30.06.17 All contracts (including X) 20 ZAR152.4m 7-18 months 59* ZAR19.524m ZAR21.634m 8 kilometres Contract X - £12.8m 9 months 12 £2.037m £2.912m 11.5 kilometres £10.36m