State University Is Considering Hiring an Outside Company for Its

question 61

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

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Definitions:

Contract Clause

The clause in the U.S. Constitution that prohibits the government from unreasonably interfering with an existing contract.

United States Constitution

The supreme law of the United States, establishing the framework of the national government and defining the rights of citizens.

Existing Contracts

Legal agreements that are currently in force between parties, outlining rights and obligations of those parties.

Federalism

A system of government in which power is divided between a central authority and constituent political units.