Case study 6.1: Brewster Roofing Mr Brewster operates a roofing company in London per cent. Additional materials costing $3,000 are al and has been asked

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Case study 6.1: Brewster Roofing Mr Brewster operates a roofing company in London per cent. Additional materials costing $3,000 are al and has been asked by the local government authority required. of Merton to repair the roofs of several of their Mr Brewster has costed the job as follows: properties damaged in a recent storm. The job must be completed during the next four weeks (twenty Revenue E16,000 working days), and Merton has offered E16,000 for the Costs Labour 19,000 job. Mr Brewster has estimated that the job requires Materials E8,000 seventy-five work days, but he can only use his regular Total costs E17,000 three workers for the job because it is a very busy Profit (E1,000) period for the industry as a whole. Fortunately, On the basis of the above analysis Mr Brewster rejects Mr Brewster's son, Will, can take time off from his the job. regular job (paying $80 per day) to help complete the work. Mr Brewster has estimated that, for his regular employees, the cost per work day is E1 50. This consists Questions of a wage of E100 (which is only paid if the employee 1 Prepare a revised cost estimate for the job, taking is working) and #50 in contributions to the into account opportunity costs, replacement costs government (which are paid annually regardless of and incremental costs. Assume that Mr Brewster how many days the employees work). considers the job from the viewpoint of a family Brewster Roofing has all the equipment necessary business, including himself and his son together. for the job and has some of the materials available in 2 Advise Mr Brewster regarding whether he should inventory. The materials cost $5,000 originally, but accept the job, stating any assumptions involved in these costs have since increased by an average of 5 your analysis