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 $19 per layout page. The budget for the Publication Department for the current year is as follows: Salaries $213,200 Benefits 48,500 Supplies 25,800 Office expenses 32,300 Office depreciation 29,100 Computer depreciation 19,400 Total $368,300 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 The area of accounting concerned with the effect of alternative courses of action on revenues and costs.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 $ $ $ 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 more less than performing the layout work internally. The fixed costs (depreciation expenses) in the budget are relevant irrelevant to the decision. Thus, the work should be not be purchased from the outside on a strictly financial basis. c. Before electing to keep lay off the five employees, the Guild should consider the short-run impact long-run impact of the decision.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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 $19 per layout page. The budget for the Publication Department for the current year is as follows:
| Salaries | $213,200 |
| Benefits | 48,500 |
| Supplies | 25,800 |
| Office expenses | 32,300 |
| Office |
29,100 |
| Computer depreciation | 19,400 |
| Total | $368,300 |
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 The area of accounting concerned with the effect of alternative courses of action on revenues and costs.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 | $ | $ | $ |
| 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
- more
- less
- relevant
- irrelevant
- be
- not be
c. Before electing to
- keep
- lay off
- short-run impact
- long-run impact
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