For most construction projects, Bradley 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 Kerry Park

shopping mall to be as follows:

Materials------------------------------------------------------$35,000

Labor to form ductwork------------------------------------3,000

Labor to install ductwork---------------------------------9,000

Misc. variable cost----------------------------------------1,500

Fixed costs allocated based on labor hours------3,000

Total costs--------------------------------------------------$51,500

The fixed costs relate to the companys building equipment, and office staff. The company plans on billing the

Kerry Park developer $68,000 for services. Bradley is currently behind schedule on other projects and is

paying a late penaalty of $1,200 per day. Walt Bradley, the owner of bradley heating and cooling, is considering

ordering prefabricated ductwork for the Kerry Park job. The prefabricated ductwork will cost $40,000 (including the

cost of sheet metal). If Walt buys the prefabricated ductwork, he'll be able to reassign workers to another project

and avoid 5 days of late fees.

REQUIRED: Answer Question And fill out chart below.

Should Bradley make the ductwork or buy it prefabricated?

FILL OUT THE CHART

Do not buy prefabricated Buy prefabricated Buy difference

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