Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Ajax Construction Inc. plans to erect a new building. It will use part of the space for its own offices and lease the balance of
Ajax Construction Inc. plans to erect a new building. It will use part of the space for its own offices and lease the balance of the space to tenants. The company has two alternatives: (1) do its own construction work or (2) use an independent contractor. Cost estimates have been prepared showing the costs of operation for the coming year during which the new building will be constructed. The costs of constructing the building, if done by Ajax, are included in that set of estimates. If the company does its own construction work, it will not be able to handle outside construction contracts that would contribute $500,000 to net income. The costs attributable to these outside contracts are excluded from the estimated costs of operation shown below. The independent company has bid $4,000,000 for the job. Required: Which of the two alternatives should be selected? Show all calculations. Are there any qualitative or non-financial factors that the firm should consider in the decision making process? (10 marks) Ajax Construction Inc. plans to erect a new building. It will use part of the space for its own offices and lease the balance of the space to tenants. The company has two alternatives: (1) do its own construction work or (2) use an independent contractor. Cost estimates have been prepared showing the costs of operation for the coming year during which the new building will be constructed. The costs of constructing the building, if done by Ajax, are included in that set of estimates. If the company does its own construction work, it will not be able to handle outside construction contracts that would contribute $500,000 to net income. The costs attributable to these outside contracts are excluded from the estimated costs of operation shown below. The independent company has bid $4,000,000 for the job. Required: Which of the two alternatives should be selected? Show all calculations. Are there any qualitative or non-financial factors that the firm should consider in the decision making process? (10 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started