Part (b)- 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. Materials Labour Indirect materials and supplies Supervision Taxes and insurance Heat and light Maintenance and repairs Truck and equipment operation Depreciation Travel Telephone Other utilities Miscellaneous Estimated Costs to Operate - Constuction by Independent Contractors $6,000,000 3,000,000 315,000 650,000 50,000 47,000 106,000 91,000 60,000 40,000 10,000 50,000 10,000 Estimated Costs to Operate (including Construction) - Construction by Ajax (self) $7,000,000 4,800,000 400,000 780,000. 55,000 47,000 106,000 91,000 60,000 43,000 10,000 50,000 10,000 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 (10 marks) process?

A/ax Construction Inc plans to erect a new building. It will use part of the space for its own offices and Part (b) - 10 marks 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)