Refer to the information for Exercise 6.27.

1. Calculate the fee charged to redecorate the council offices, assuming that the firm uses a chargeout rate of $360 per professional labour hour (which includes a profit margin of 40 per cent) and 120 hours are worked on this contract. Materials are charged to the client at cost.

2. Explain the key differences between this approach to estimating service fees and the method described in Exercise 6.27.

3. Which method would you recommend for estimating client fees? Explain your answer.

Information from Exercise 6.27

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