Problem P7-4 Make-or-Buy Decision
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			4,000
		Labor to install ductwork			10,000
		Misc. variable costs			1,500
		Fixed costs allocated based on labor hours			3,000
		Total costs			$53,500
The fixed costs relate to the company's 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 penalty 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					$42,000	(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:
Should Bradley make the ductwork or buy it prefabricated?
				Do not buy Prefabricated	Buy Prefabricated	Buy Difference
		Materials		Amount	Amount	Formula
		Title		Amount	Amount	Formula
		Title		Amount	Amount	Formula
		Title		Amount	Amount	Formula
		Title		Amount	Amount	Formula
		Title		Amount	Amount	Formula
		Total		Formula	Formula	Formula
Narrative answer: