Solution: Exercise 7-5 Incremental Analysis Problem data follows: Annual number of customers surveyed 7,600 Cost of survey if conducted by RBG Associates $35,000 Costs related to the survey in the prior year. Mailing $17,500 Printing (done by Lester Print Shop) 6,000 Salary of Pat Fisher, part-time employee who stuffed envelopes

and summarized data when surveys were returned 2,080 Share of depreciation of computer and software used to track survey responses and summarized results 1,200 Rent Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company 600 Total $27,380 Number of hours spent on survey by Pat Fisher 130 Required What is the incremental cost of going outside versus conducting the survey as in the past? Enter cost name here Less cost savings: Enter Cost saving name here Enter cost saving name here Enter Cost saving name here Enter wording of this total here Will Craig Knight accept the RBG offer?

Problem 7-4 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. Expected billings and other costs pertaining to Kerry Park are: Projected billing of Kerry Park for services $68,000 Bradley is currently behind schedule on other projects which incurs costs as follows: Late penalty $6,000 Walt Bradley, the owner of Bradley Heating and Cooling, is considering ordering prefabricated ductwork for the Kerry Park job, which includes the cost of sheet metal. The following cost is expected: Prefabricated ductwork cost $42,000 If Walt buys the prefabricated ductwork, he'll be able to reassign workers to another project and avoidlate fees. If Walt buys the pre-fabricated ductwork, workers will still install the ductwork and incurr miscellaneous variable costs for the Kerry Park Job. Required Complete the schedule to determine if Bradleyshould make the ductwork or buy it prefabricated? Enter a 0 for any cells without a number. Do not buy

Prefabricated Buy

Prefabricated Difference Materials Labor to form ductwork Labor to install ductwork Miscellaneous variable costs Fixed costs allocated based on labor hours Penalty Total cost Explain if Bradley should make the ductwork or buy it prefabricated.