Job costing and pricing: interior decorating firm Illusions is an interior decorating firm located in Adelaide. The following costs were incurred in the firm's contract to redecorate the local council offices: Direct material Professional labour $11200 24000 The firm's budget for the year included the following estimates: Budgeted overhead Budgeted professional labour $1600000 1000000 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 40 per cent profit margin to total cost. Job billing: interior decorating firm (continuation of Exercise E6.25) Refer to the information for Exercise E6.25. 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 E6.25. 3. Which method would you recommend for estimating client fees? Explain your answer. Classifying costs; value chain: insurance Using the value chain classifications provided, classify the costs listed below for a major bank: (a) research and development (b) design (c) production/delivery (d) marketing (e) customer support. Costs: 1. Salaries of the customer service staff who process deposits and withdrawals. 2. Salaries of the managers who develop new services. 3. Cost of IT equipment used by customer service staff. 4. Cost of the central computer systems used to manage and process all transactions. 5. Salaries of staff who deal with customer complaints. 6. Cost of operating ATMs. 7. Cost of TV advertising. 8. Salaries of the head office team that monitors trends in the banking industry.