State University Is Considering Hiring an Outside Company for Its

question 93

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 is the first year financial impact of hiring the outside company for its grounds maintenance?

• A) $13,000 additional cost
• B) $2,000 savings
• C) $17,000 savings
• D) $30,000 savings

Grasp the concept of normal standards and their role in operational planning.

Recognize the conditions that necessitate the revision of standard costs.

Appreciate the principle of exceptions and its application in managerial decision-making.

Understand the concept of standard costing and its components.

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Definitions:

Variables

Elements, features, or factors that are liable to vary or change within a study, experiment, or any form of research.

Sample

A subset of individuals or items selected from a larger population, used in research to draw conclusions about the entire population.

Independent Variable

The variable that is manipulated or changed in an experiment to investigate its effect on the dependent variable.

Experimental Group

In a scientific study, the group of subjects who receive the treatment or condition being tested, as opposed to the control group.