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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 $13 per layout page. The budget for the Publication Department for the current year is as follows: Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation

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 $13 per layout page. The budget for the Publication Department for the current year is as follows: Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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eBook outside (Alternative 2). If an amount is zero, enter "0". Differential Analysis Lay Out Pages Internally (Alt. 1) or Purchase Layout Services (Alt. 2) February 22 Line Item Description Costs: Purchase price of layout work Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation Total costs Lay Out Pages Internally (Alternative 1) 224,000 36,000 -21,000 39,000 Purchase Layout Services (Alternative 2) -312.000 Differential Effects (Alternative 2) b. The benefit from using an outside service is shown to be greater budget are irrelevant ✓to the decision. Thus, the work should he c. Before electing to lay off 312,000 224,000 36,000 21,000 39,000 28,000 8,000 ✓than performing the layout work internally. The fixed costs (depreciation expenses) in the purchased from the outside on a strictly financial basis of the decision ✔the five employees, the TAG-D should consider the long-run impact
Transcribed Image Text:eBook outside (Alternative 2). If an amount is zero, enter "0". Differential Analysis Lay Out Pages Internally (Alt. 1) or Purchase Layout Services (Alt. 2) February 22 Line Item Description Costs: Purchase price of layout work Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation Total costs Lay Out Pages Internally (Alternative 1) 224,000 36,000 -21,000 39,000 Purchase Layout Services (Alternative 2) -312.000 Differential Effects (Alternative 2) b. The benefit from using an outside service is shown to be greater budget are irrelevant ✓to the decision. Thus, the work should he c. Before electing to lay off 312,000 224,000 36,000 21,000 39,000 28,000 8,000 ✓than performing the layout work internally. The fixed costs (depreciation expenses) in the purchased from the outside on a strictly financial basis of the decision ✔the five employees, the TAG-D should consider the long-run impact
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 $13 per layout page. The budget for the Publication Department for the current year is as follows: Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation Total The department expects to lay out 24,000 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 lay out pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0". $224,000 36,000 21,000 39,000 28,000 24,000 $372,000 Line Item Description Costs Differential Analysis Lay Out Pages Internally (Alt. 1) or Purchase Layout Services (Alt. 2) February 22 Purchase price of layout work Lay Out Pages Purchase Layout Differential Effects Internally (Alternative 2) (Alternative 1) Services (Alternative 2) -312,000 -312,000
Transcribed Image Text: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 $13 per layout page. The budget for the Publication Department for the current year is as follows: Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation Total The department expects to lay out 24,000 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 lay out pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0". $224,000 36,000 21,000 39,000 28,000 24,000 $372,000 Line Item Description Costs Differential Analysis Lay Out Pages Internally (Alt. 1) or Purchase Layout Services (Alt. 2) February 22 Purchase price of layout work Lay Out Pages Purchase Layout Differential Effects Internally (Alternative 2) (Alternative 1) Services (Alternative 2) -312,000 -312,000
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