Inter item on service contract

(Note 1167493.1).

This was the  suggested solution  to a question I asked the group.  Now I have questions about implementing the solution.

How do I enter items on a service contract and do I have to have a separate contract for each supplier?

Each item is setup with catagory set FD_Program and category code either Assemblies or Miscellanious. These are setup on the Master Item. The instructions state:  The Pricing Engine only recognizes categories added under the default Item Category Set.  Does this mean under Order Managagement Superuser > Setup>Items>Categories do I need to add these category set and codes under "Default Category Sets"?  If yes, what would the "Functional Area" be?