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    Financial Impact of Outsourcing Landscaping Functions

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    With this data I need to find out:
    1) The one year financial impact of outsourcing the grounds maintenance
    2) How will savings in the second year differ from year one
    3) Find qualitative factors that should be considered in the decision whether or not to outsource.

    Here is the data for this problem:
    College A is considering outsourcing their groundskeeping. They have been given a bid from Groundskeeper Willie for $250,000 per year, with the claim that he will keep the school grounds in the same condition they are in now. College A's maintenance costs for the previous year was $267,000 and is as follows:

    Salary of gardeners: $185,000
    Plant Materials: $65,000
    Fertilizer: $5,000
    Fuel: $4,000
    Depreciation: $8,000
    Total: $267,000

    Should College A decide to go with Groundskeeper Willie's bid, they will lay off their gardeners and be able to sell equipment for $20,000.

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    Solution Preview

    Here are your answers:

    1. One year financial impact:
    Before the deal. they would have a net outflow of $267,000
    After the deal. they would have a net inflow of $270,000

    Bid from outsourcer = $250,000
    Sale of equipment = $20.000
    Total inflow = $270,000

    Note: I am assuming that the outsourcer would then ...