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?

Question

Business

Dorian Morse

7 September, 10:29

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?

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Answers (1)

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Wu · 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.