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 papes 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 $17 per layout page. The budget for the Publication Department for the current year is as follows: Salaries $190,700 Benefits 43,400 Supplies 23,100 Office expenses 28,900 Office depreciation 26,000 Computer depreciation 17,300 Total $329,400 The department expects to lay out 17,000 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". 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 strictiy financial basis. C. Before electing to the five employees, the guild 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 in its Publication Department. These people lay out pages for pamphlets, brochures, magazines, and other publications for the TAG-D productions. The papes 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 $17 per layout page. The budget for the Publication Department for the current year is as follows: Salaries $190,700 Benefits 43,400 Supplies 23,100 Office expenses 28,900 Office depreciation 26,000 Computer depreciation 17,300 Total $329,400 The department expects to lay out 17,000 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". 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 strictiy financial basis. C. Before electing to the five employees, the guild should consider the of the decision
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Make or-Buy Dečision for a Service Company
The Theater Arts Guld 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 $17 per layout page. The budget for the Publication Department for
the current year is as follows:
Salaries
$190,700
Benefits
43,400
Supplies
23,100
Office expenses
28,900
Office depreciation
26,000
Computer depreciation
17,300
Total
$329,400
The department expects to lay out 17,000 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". For those boxes in which you must enter subtracted or negative numbers use a
minus sign
Differential Analysis
Lay out Pages lInternally (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
(depreciation expenses) in the budget are
outside on a strictly financial basis.
than performing the lay out work internally, The fixed costs
to the decision. Thus, the work should
purchased from the
C. Before electing to
the five employees, the guild should oonsider the
of the decision.
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