Poochie Veterinary Practice has overheads of 10,400 each month. Each month 500 direct labour hours are worked and charged to specific jobs, each of which involves minor operations on domestic pets. The business has received an enquiry from Charlton Kennels, which wants Poochie to take on a regular contract to provide veterinary services to Charlton's dogs. Poochie estimates that taking on the contract will have the following financial implications per mont (click here to view financial information) Overheads are charged to jobs on a direct labour hour basis. The cost to the customer is full cost plus 100%. Charlton Kennels is prepared to pay a maximum fee of 237 per month. Required: Calculate the full cost and the amount to be charged to Charlton Kennels. Should Poochie Veterinary Practice take on the contract? Firstly, the overhead absorption rate can be found by this formula: (Complete the necessary drop downs.) The values can now be inserted (calculate the overhead absorption rate to two decimal places): Overhead absorption rate = per direct labour hour The full cost of the proposed contract can now be calculated (give the answer to two decimal places): Direct materials Direct labour Overheads Full cost of the job Finally, the amount to be charged to the customer for the contract can be calculated (give the answer to two dec More info Direct materials () Direct labour (hours) Wage rate ( per hour) 39.00 3 19.00 Print Done above Profit added Amount charged to customer below Poochie Veterinary Practice should not accept the contract as the fee Charlton Kennels is prepared to pay is the calculated amount that should be charged for the contract