Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

For most construction projects, H55 Heating and Cooling buys sheet metal and forms the metal into heating/cooling ducts as needed. The company estimates the costs

For most construction projects, H55 Heating and Cooling buys sheet metal and forms the metal into heating/cooling ducts as needed. The company estimates the costs of making and installing ductwork for the Kerry Park shopping mall to be as follows:

Materials $34,470
Labor to form ductwork 3,890
Labor to install ductwork 10,610
Miscellaneous variable installation costs 1,410
Fixed costs allocated based on labor hours 3,120
Total cost $53,500

The fixed costs relate to the companys building, equipment, and office staff. The company plans to bill the Kerry Park developer $68,000 for services. H55 is currently behind schedule on other projects and is paying a late penalty of $1,195 per day. Walt Bradley, the owner of H55 Heating and Cooling, is considering ordering prefabricated ductwork for the Kerry Park job. The prefabricated ductwork will cost $41,160 (including the cost of sheet metal). If Walt buys the prefabricated ductwork, hell be able to reassign workers to another project and avoid five days of late fees. Should H55 make the ductwork or buy it prefabricated?

Net incremental cost or benefit of buying will be $_________. H55 should make or buy the prefabricated ductwork.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Corporate Reporting Global And Diverse

Authors: Pauline Weetman, Ioannis Tsalavoutas, Paul Gordon

5th Edition

1138364991, 9781138364998

More Books

Students also viewed these Accounting questions