Problem 7-2 (Part Level Submission)

Kokomo College is considering outsourcing grounds maintenance. In this regard, Kokomo has received a bid from Highline Grounds Maintenance for $287,400 per year. Highline states that its bid will cover all services and planting materials required to keep Kokomos grounds in a condition comparable to prior years. Kokomos cost for grounds maintenance in the preceding year were $297,200, as follows:

Salary of three full-time gardeners $181,700

Plant materials 79,500

Fertilizer 10,600

Fuel 12,900

Depreciation of tractor, mowers, and other miscellaneous equipment 12,500

Total $297,200

If Kokomo College outsources maintenance, it will be able to sell equipment for $32,100, and the three gardeners will be laid off.

Analyze the 1-year financial impact of outsourcing grounds maintenance.

Net (Benefit or Cost) of outsourcing in year 1 is $? .