Question
For most construction projects, Bradley buys sheet metal and forms the metal into heating/cooling ducts as needed. The company estimates the cost of making and
For most construction projects, Bradley buys sheet metal and forms the metal into heating/cooling ducts as needed. The company estimates the cost of making and installing ductwork for a shopping mall to be as following: Materials: $35,000 Labor to form ductwork: 4,000 Labor to install ductwork: 10,000 Misc. variable costs: 1,500 Fixed costs allocated based on labor hours: 3,000 The fixed costs relate to the companys building, equipment, and office staff. The company plans to bill the mall $68,000 for services. Bradley is currently behind schedule on other projects as if paying a late penalty of $1,200 per day. Bradley is considering ordering prefabricated ductwork for the mall. The prefabricated ductwork will cost $42,000 (including the cost of sheet metal). If Bradley buys the prefabricated ductwork, he will be able to reassign workers to another projects and avoid five days of late penalty. Should Bradley make the ductwork or buy it prefabricated? Please show work!
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