Make-or-Buy Decision for a Service Company
The Theater Arts Guild of Dallas (TAG-D) employs five people inits Publication Department. These people lay out pages forpamphlets, brochures, magazines, and other publications for theTAG-D productions. The pages are delivered to an outside companyfor printing. The company is considering an outside publicationservice for the layout work. The outside service quoting a price of$12 per layout page. The budget for the Publication Department forthe current year is as follows:
Salaries $174,200 Benefits 39,600 Supplies 21,100 Office expenses 26,400 Office depreciation 23,800 Computer depreciation 15,800 Total $300,900
The department expects to lay out 22,000 pages for the currentyear. The Publication Department office space and equipment wouldbe used for future administrative needs, if the departmentâsfunction were purchased from the outside.
a. Prepare a differential analysis datedFebruary 22 to determine whether TAG-D should lay out pagesinternally (Alternative 1) or purchase layout services from theoutside (Alternative 2). If an amount is zero, enter "0". For thoseboxes in which you must enter subtracted or negative numbers use aminus sign.
Differential Analysis Layout Pages Internally (Alt. 1) or Purchase Lay out Services (Alt.2) February 22 Lay out Pages Internally (Alternative1) Purchase Lay out Services (Alternative2) Differential Effect on Income (Alternative2) Selling Price $0 $0 $0 Costs: Purchase price of lay out work $ $ $ Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation Income (loss) $ $ $
b. The benefit from using an outside service isshown to be than performing the lay out work internally. The fixedcosts (depreciation expenses) in the budget are to the decision.Thus, the work should purchased from the outside on a strictlyfinancial basis.
c. Before electing to the five employees, theguild should consider the of the decision.
Make-or-Buy Decision for a Service Company
The Theater Arts Guild of Dallas (TAG-D) employs five people inits Publication Department. These people lay out pages forpamphlets, brochures, magazines, and other publications for theTAG-D productions. The pages are delivered to an outside companyfor printing. The company is considering an outside publicationservice for the layout work. The outside service quoting a price of$12 per layout page. The budget for the Publication Department forthe current year is as follows:
| Salaries | $174,200 |
| Benefits | 39,600 |
| Supplies | 21,100 |
| Office expenses | 26,400 |
| Office depreciation | 23,800 |
| Computer depreciation | 15,800 |
| Total | $300,900 |
The department expects to lay out 22,000 pages for the currentyear. The Publication Department office space and equipment wouldbe used for future administrative needs, if the departmentâsfunction were purchased from the outside.
a. Prepare a differential analysis datedFebruary 22 to determine whether TAG-D should lay out pagesinternally (Alternative 1) or purchase layout services from theoutside (Alternative 2). If an amount is zero, enter "0". For thoseboxes in which you must enter subtracted or negative numbers use aminus sign.
| Differential Analysis | |||
| Layout Pages Internally (Alt. 1) or Purchase Lay out Services (Alt.2) | |||
| February 22 | |||
| Lay out Pages Internally (Alternative1) | Purchase Lay out Services (Alternative2) | Differential Effect on Income (Alternative2) | |
| Selling Price | $0 | $0 | $0 |
| Costs: | |||
| Purchase price of lay out work | $ | $ | $ |
| Salaries | |||
| Benefits | |||
| Supplies | |||
| Office expenses | |||
| Office depreciation | |||
| Computer depreciation | |||
| Income (loss) | $ | $ | $ |
b. The benefit from using an outside service isshown to be than performing the lay out work internally. The fixedcosts (depreciation expenses) in the budget are to the decision.Thus, the work should purchased from the outside on a strictlyfinancial basis.
c. Before electing to the five employees, theguild should consider the of the decision.
Related questions
Make-or-Buy Decision for a Service Company
The Theater Arts Guild of Dallas (TAG-D) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, magazines, and other publications for the TAG-D productions. The pages are delivered to an outside company for printing. The company is considering an outside publication service for the layout work. The outside service quoting a price of $12 per layout page. The budget for the Publication Department for the current year is as follows:
| Salaries | $174,200 |
| Benefits | 39,600 |
| Supplies | 21,100 |
| Office expenses | 26,400 |
| Office depreciation | 23,800 |
| Computer depreciation | 15,800 |
| Total | $300,900 |
The department expects to lay out 22,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the departmentâs function were purchased from the outside.
a. Prepare a differential analysis dated February 22 to determine whether TAG-D should lay out pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
| Differential Analysis | |||
| Lay out Pages Internally (Alt. 1) or Purchase Lay out Services (Alt. 2) | |||
| February 22 | |||
| Lay out Pages Internally (Alternative 1) | Purchase Lay out Services (Alternative 2) | Differential Effect on Income (Alternative 2) | |
| Selling Price | $0 | $0 | $0 |
| Costs: | |||
| Purchase price of lay out work | $ | $ | $ |
| Salaries | |||
| Benefits | |||
| Supplies | |||
| Office expenses | |||
| Office depreciation | |||
| Computer depreciation | |||
| Income (loss) | $ | $ | $ |
b. The benefit from using an outside service is shown to be than performing the lay out work internally. The fixed costs (depreciation expenses) in the budget are to the decision. Thus, the work should purchased from the outside on a strictly financial basis.
c. Before electing to the five employees, the guild should consider the of the decision.
