PROBLEM 7-2. Incremental Analysis of Outsourcing Decision Oakland College is considering outsourcing their grounds maintenance. In this regard, Oakland has received a bid from Highline Grounds Maintenance for $250,000 per year. Highline states that their 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 $267,000 as follows:
Salary of 3 full-time gardeners $185,000 Plant materials 65,000 Fertilizer 5,000 Fuel 4,000 Depreciation of tractor, mowers, and other miscellaneous equipment 8,000 Total $267,000 se ^
If Oakland College outsources maintenance, it will be able to sell equipment for $20,000, and the three gardeners will be "laid off."
Required

a. Analyze the one year financial impact of outsourcing grounds maintenance.

b. How will savings in the second year differ from year one?

c. Discuss qualitative factors that should be considered in the decision.