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 $19 per layout page. The budget for the Publication Department for the current year is as follows:
The department expects to lay out 17,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department's function were purchased from the outside.
a. Prepare a The area of accounting concerned with the effect of alternative courses of action on revenues and costs.differential analysis dated February 22 to determine whether TAG-D should layout pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
|Lay out Pages Internally (Alt. 1) or Purchase Layout Services (Alt. 2)|
|Purchase price of lay out work||$||$||$|
b. The benefit from using an outside service is shown to be
c. Before electing to
Difference analysis of layout pages internally and Purchase Lay out services.
The results of the formulas used in Excel are shown below.
Less, Relevant, Not be
The benefit from making pages internally is $3400 as compared to the purchase option; hence it would be beneficial to make...
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