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 is quoting a price of $12 per layout page. The budget for the Publication Department for the current year is as follows: Salaries $158,400 Benefits 36,000 Supplies 19,200 Office expenses 24,000 Office depreciation 21,600 Computer depreciation 14,400 Total $273,600 The department expects to lay out 20,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department's function were purchased from the outside. a. Prepare a differential analysis dated February 22 to determine whether TAG-D should layout 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 Layout Services (Alt. 2) February 22 Lay out Pages Internally (Alternative 1) Purchase Lay out Services (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $fill in the blank cc57e203f00803d_1 $fill in the blank cc57e203f00803d_2 $fill in the blank cc57e203f00803d_3 Costs: Purchase price of lay out work $fill in the blank cc57e203f00803d_4 $fill in the blank cc57e203f00803d_5 $fill in the blank cc57e203f00803d_6 Salaries fill in the blank cc57e203f00803d_7 fill in the blank cc57e203f00803d_8 fill in the blank cc57e203f00803d_9 Benefits fill in the blank cc57e203f00803d_10 fill in the blank cc57e203f00803d_11 fill in the blank cc57e203f00803d_12 Supplies fill in the blank cc57e203f00803d_13 fill in the blank cc57e203f00803d_14 fill in the blank cc57e203f00803d_15 Office expenses fill in the blank cc57e203f00803d_16 fill in the blank cc57e203f00803d_17 fill in the blank cc57e203f00803d_18 Office depreciation fill in the blank cc57e203f00803d_19 fill in the blank cc57e203f00803d_20 fill in the blank cc57e203f00803d_21 Computer depreciation fill in the blank cc57e203f00803d_22 fill in the blank cc57e203f00803d_23 fill in the blank cc57e203f00803d_24 Income (loss) $fill in the blank cc57e203f00803d_25 $fill in the blank cc57e203f00803d_26 $fill in the blank cc57e203f00803d_27 b. The benefit from using an outside service is shown to be than performing the layout 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.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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 is quoting a price of $12 per layout page. The budget for the Publication Department for the current year is as follows:
| Salaries | $158,400 |
| Benefits | 36,000 |
| Supplies | 19,200 |
| Office expenses | 24,000 |
| Office |
21,600 |
| Computer depreciation | 14,400 |
| Total | $273,600 |
The department expects to lay out 20,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department's function were purchased from the outside.
a. Prepare a differential analysis dated February 22 to determine whether TAG-D should layout 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 Layout Services (Alt. 2) | |||
| February 22 | |||
| Lay out Pages Internally (Alternative 1) |
Purchase Lay out Services (Alternative 2) |
Differential Effect on Income (Alternative 2) |
|
| Sales price | $fill in the blank cc57e203f00803d_1 | $fill in the blank cc57e203f00803d_2 | $fill in the blank cc57e203f00803d_3 |
| Costs: | |||
| Purchase price of lay out work | $fill in the blank cc57e203f00803d_4 | $fill in the blank cc57e203f00803d_5 | $fill in the blank cc57e203f00803d_6 |
| Salaries | fill in the blank cc57e203f00803d_7 | fill in the blank cc57e203f00803d_8 | fill in the blank cc57e203f00803d_9 |
| Benefits | fill in the blank cc57e203f00803d_10 | fill in the blank cc57e203f00803d_11 | fill in the blank cc57e203f00803d_12 |
| Supplies | fill in the blank cc57e203f00803d_13 | fill in the blank cc57e203f00803d_14 | fill in the blank cc57e203f00803d_15 |
| Office expenses | fill in the blank cc57e203f00803d_16 | fill in the blank cc57e203f00803d_17 | fill in the blank cc57e203f00803d_18 |
| Office depreciation | fill in the blank cc57e203f00803d_19 | fill in the blank cc57e203f00803d_20 | fill in the blank cc57e203f00803d_21 |
| Computer depreciation | fill in the blank cc57e203f00803d_22 | fill in the blank cc57e203f00803d_23 | fill in the blank cc57e203f00803d_24 |
| Income (loss) | $fill in the blank cc57e203f00803d_25 | $fill in the blank cc57e203f00803d_26 | $fill in the blank cc57e203f00803d_27 |
b. The benefit from using an outside service is shown to be than performing the layout 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.
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