Design contracts OTF has recently started to create contracts for clients that inciude a fee for the design process of specialty furniture items. The first step in the design process is the creation of a customized design plan. OTF charges customers a non-refundable flat fee of $1,500 to prepare this design plan. However, if the customer proceeds with the project, the full amount of the design fee is credited against the final invoice. There is no time limit on the credit, so even if the customer decides to proceed with the project at a later date, the credit can still be applied. OTF pays a designer $40 per hour to prepare the design plans. The average plan takes about 10 hours to complete. The design plan is created using OTF's customized software, which interfaces with OTF's automated machinery. All of the specifications can be read by the computerized machinery directly from the design plans. OTF retains the design plan; however, if a customer decides not to use OTF to do the work, the customer can purchase a copy of the plan at any time for an additional $500. Approximately 75% of customers proceed with the project immediately after the design plan is created. Another 15% proceed with the project at a later date. Of the customers who do not proceed with the project, about half pay the additional $500 fee to obtain a copy of the design plan