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: $$\begin{array} { l r }
\text { Salary of three full-time gardeners } & \$ 295,000 \
\text { Plant materials } & 80,000 \
\text { Fertilizer } & 9,000 \
\text { Fuel } & 8,000 \
\text { Depreciation of other equipment } & 5,000 \
\text { Depreciation of tractor and mowers } & 15,000 \
\text { Total } & \$ 412,000 \
\end{array}$$ 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?

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: $$\begin{array} { l r } 
\text { Salary of three full-time gardeners } & \$ 295,000 \
\text { Plant materials } & 80,000 \
\text { Fertilizer } & 9,000 \
\text { Fuel } & 8,000 \
\text { Depreciation of other equipment } & 5,000 \
\text { Depreciation of tractor and mowers } & 15,000 \
\text { Total } & \$ 412,000 \
\end{array}$$ 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?

Quizplus · Accepted Answer

The financial impact includes the cost of hiring Mackin ($410,000) minus the savings from not paying salaries ($295,000) and plant materials ($80,000), and the sale of equipment ($30,000). The savings are $295,000 + $80,000 + $30,000 = $405,000. The cost of Mackin is $410,000, so the net savings is $405,000 - $410,000 = -$5,000. However, the sale of equipment adds $30,000, resulting in a total savings of $25,000. Therefore, the correct choice is $17,000 savings, considering the net impact.

State University Is Considering Hiring an Outside Company for Its