29) Managerial Financial Accounting Assignments AP7-2 (a,b) Solution

29) Managerial Financial Accounting Assignments AP7-2 (a,b) Solution

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AP7-2 (a,b)
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Incremental Analysis of Outsourcing Decision [LO 1, 2, 4] Oakland College is considering outsourcing grounds maintenance. In this regard, Oakland has received a bid from Highline Grounds Maintenance for $310,170 per year. Highline states that its bid will cover all services and planting materials required to "keep Oakland's grounds in a condition comparable to prior years." Oakland's cost for grounds maintenance in the preceding year were $317,360 as follows: Sa la ry of th re e fu ll- ti m e ga rd en er s $200 ,550 Pl an t m at er ial s 86,5 90 Fe rti liz er 8,10 0 F ue l 8,72 0 D ep re ci ati on
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of tr ac to r, m o w er s, an d ot he r m is ce lla ne ou s eq ui p m en t 13 ,4 00 T ot al $317 ,360 If Oakland College outsources maintenance, it will be able to sell equipment for $34,350, and the three gardeners will be laid off.
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Unformatted text preview: Analyze the one-year financial impact of outsourcing grounds maintenance. $[no answer] AP7-2 (a,b) Cost savings Salary of gardeners $200,550 Plant materials 86,590 Fertilizer 8,100 Fuel 8,720 $303,960 Proceeds from sale of equipment 34,350 338,310 Less cost of Highline 310,170 Net benefit of outsourcing in year 1 $28,140 How will savings in the second year differ from those in year 1? $[no answer] Increase Click here if you would like to Show Work for this question AP7-2 (a,b) In the second year, savings will decrease by $34,350 since the proceeds from the sale of equipment only pertain to the first year. There will be a net cost of $6,210 ($303,960 - $310,170)....
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This note was uploaded on 06/21/2011 for the course MANAGERIAL MT425 taught by Professor Hodgson,k during the Spring '11 term at Kaplan University.

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29) Managerial Financial Accounting Assignments AP7-2 (a,b) Solution

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