State University Is Considering Hiring an Outside Company for Its

question 117

Multiple Choice

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 will savings be in the second year?

• A) $13,000 additional costs
• B) $2,000 savings
• C) $7,000 savings
• D) $30,000 savings

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