State University is considering hiring an outside company for its grounds mainte

Question

State University is considering hiring an outside company for its grounds maintenance. In this regard, State University has received a bid from Mackin Services. Mackin states that its bid of $410,000 will cover all services and planting materials required to “keep State University’s grounds in a condition comparable to prior years.” State University’s cost for grounds maintenance in the preceding year was $412,000 as follows:

If State University hires Mackin, it will be able to sell its other equipment for $30,000, and the three gardeners will be laid off. What is the first year financial impact of hiring the outside company for its grounds maintenance?

Salary of three full-time gardeners $295,000 Plant materials 80,000 Fertilizer 9,000 Fuel 8,000 Depreciation of other equipment 5,000 Depreciation of tractor and mowers 15,000 Total $412,000

Explanation / Answer

Impact of hiring outside company for grounds maintenance :

so answer is a) 12000 Savings

Ground maintenance Hiring Salary 295000 Opportunity cost 30000 Plant materials 80000 Fertilizer 9000 Fuel 8000 Hiring cost 410000 Total 422000 410000

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