Question

Torque Engine Company is considering opening a plant in China. It will cost $3,500,000 to set up the plant and $750,000 to train employees. An additional $100,000 will be spent to build relationships with the local suppliers. The company anticipates gross profit of $4,400,000 from this new plant. Do the benefits outweigh the costs or do the costs outweigh thebenefits, and by how much?

Answer 1

Answer:  Benefits outweigh the costs by $50,000.

Explanation:

Given that,

Plant set up cost = $3,500,000

Cost to train employees = $750,000

Cost to build relationships = $100,000

Gross profit from plant(Benefits) = $4,400,000

Total costs = Plant set up cost + Cost to train employees + Cost to build relationships

                  = $3,500,000 +  $750,000 + $100,000

                  = $4,350,000

Difference = Total benefits - Total costs

                  = $4,400,000 - $4,350,000

                  = $50,000

Therefore, benefits outweigh the costs by $50,000.