Question

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	$275,900
Benefits	62,700
Supplies	33,400
Office expenses	41,800
Office depreciation	37,600
Computer depreciation	25,100
Total	$476,500

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 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	$______	$_______	$______
Costs:
Purchase price of lay out work	$_______	$______	$______
Salaries	________	________	_______
Benefits	_______	________	______
Supplies	________	_________	_______
Office expenses	________	________	_________
Office depreciation	________	________	______
Computer depreciation	________	_________	________
Income (loss)	$________	$________	$_______

Answer 1

Hi

Let me know in case you face any issue: