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Business Decision Making Assignment In January 2019 Lee and Kelly set up a small limited liability company called Fambis Builders (FB). This business builds kit homes in New South Wales, around Canberra. (For those of you who do not know what kit homes are, see the appendix at the end of this document.) FB is slightly different to some kit home manufacturers, as this company manages the building process. The staff at FB will complete some of the work themselves and outsource other work to qualified professionals, who have an ongoing long-term professional relationship with Lee and Kelly. Lee and Kelly contributed $1,000,000 cash to capitalize this business, using the proceeds from the sale of a previous business. In early January 2019 the company bought a factory in a rural area outside Canberra. The factory is built on land owned by the company. The land cost $100,000, the cost of constructing the factory was $500,000 They also bought equipment for $200,000. The factory and equipment will be used to fabricate metal frames for houses, before being transferred to the relevant building sites, where they will be erected. Lee and Kelly estimated that factory will have a useful expected life of 40 years with a residual value of $0. On average, the equipment will have a useful expected life of 10 years, with a residual value of $0. All assets are depreciated using the straight-line depreciation method. Lee and Kelly estimate that the cost of materials and constructing (fabricating) each metal frame in the factory will be $20,000 for Model 1, $30,000 for Model 2, and $85,000 for Model 3. After the frames have been constructed, they will be taken to the building site and assembled. Table 1 below shows their estimates of the dimensions of, and inputs required for, the different models. Please note there are variations in the units of measurement, you will see meters, square meters, square feet, lineal meters. You will need to deal with these differences in the models that you build. Table 1 Model 1 Model 2 Model 3 Width (meters) 8.0 10.0 17.5 Length (meters) 12.5 15.0 20.0 Living space (square meters) 100 150 350 Roofing (square meters) 140 230 430 Metal frame (square feet) 1,076 1,615 3,767 Guttering (lineal meters) 47 56 81 Insulation (square meters) 166 230 470 No of hours to install insulation 8 12 31 Cladding (square meters) 65.6 80.0 120.0 Cost of cladding ($ per square meter) $22 $80 $150 No of hours to install cladding 20 30 90 No of hours to install roofing 25 35 112 No of hours to install guttering 15 23 46 No of hours to prepare formwork for concrete slab 30 40 92 Internal walls and ceiling (square meters) 163 240 543 No of hours to install Gyprock (for internal walls) 64 96 275.2 No of hours to prepare Gyprock for painting 24 36 97.2 No of hours to assemble the metal frames on site 25 37 77.7 No of hours to finish and paint internal walls and ceilings 30 45 114 Cost of wardrobes (purchased and installed) $3,000 $10,000 $45,000 Cost of doors and windows (purchased and installed) $450 $675 $1,451 Cost of kitchen benches and pantry (purchased and installed) $11,000 $23,500 $46,000 Cost of plumbing (purchased and installed) $13,000 $18,000 $31,000 Cost of electrical connections (purchased and installed) $9,000 $13,500 $39,150 Inputs - materials Insulation - number of rolls 13.80 19.17 39.17 Paint - number of litres - ceilings (2 coats) 12.50 18.75 43.75 Paint - number of litres - walls – (2 coats) 7.88 11.25 24.17 Gyprock - ceiling – number of sheets 34.72 52.08 121.53 Gyprock - internal walls – number of sheets 21.90 31.25 67.13 The following text is designed to help you interpret some of the data in Table 1. Model 1 will use 65.5 square meters of cladding; Model 2 will use 80 square meters and Model 3 will use 120 square meters. The three different models will use different types of cladding. The cost per square meter for Model 1 is $22, for Model 2 is $80, and for Model 3 is $150. It is expected that Model 1 will require 20 hours of labour time to install the cladding. For Model 2, the installation time is expected to be 30 hours. Insulation will be placed in the ceiling cavity and external walls. The insulation will be sheep wool batts, which are expected to cost $90 per 12 square meters. It is expected that it will take 8 hours to install insulation in Model 1 houses, 12 hours in Model 2, and 31 hours in Model 3 houses. You estimate Model 1 will require 165.5 square meters of insulation, Model 2 will require 230 square meters, and Model 3 will require 470 square meters. The company will use Colourbond roofing material for all models. This is expected to cost $20 per square meter. All three models will be built on concrete slab foundations. Concrete is expected to cost $90 per square meter. All models will use the same type of guttering, which is expected to cost $25 per lineal meter. Gyprock (drywall) for the internal walls and ceiling is expected to cost $15 for boards that cover 2.88 square meters (1.2 meters by 2.4 meters). Paint for internal walls and the ceiling is expected to cost $170 per 10 litre can and this is expected to provide 160 square meters of coverage (16 square meters per litre). Lee wants to buy paint in 10-litre tins, as the cost per litre is cheaper, compared to buying paint in smaller cans. For example, it is expected to cost $80 to buy a 4 litre can of the same paint, which works out at $20 per litre. Please note, the internal walls and ceilings will take 2 coats. The measures above are for two coats of paint. The ceilings will be painted white. The owners will be able to select other colours for the internal walls. Kelly and Lee are comfortable their workers can complete many of the tasks, such as erecting the metal frames, installing guttering, cladding, roofing