a) Prepare a differential analysis report, dated December 15, 2009, for the make-or-buy decision, considering the 2010 differential revenues and costs.

Homework: E12-7 The Theater Arts Guild of Chicago (TAG-C) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, and other publications for the TAG-C 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 $15 per layout page. The budget for the Publication Department for 2010 is as follows: Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation Total $220,000 35,000 30,000 25,000 30,000 FC 22,000 FC $362,000 The department expects to lay ouf 20,000 pages for 2010. The computers used by the department have an estimated residule value of $7,000. The publication Department office space would be used for furniture administrative needs, if the department's function were purchased from the outside. a) Prepare a differential analysis report, dated December 15, 2009, for the make-or-buy decision, considering the 2010 differential revenues and costs. Differential Analysis Report - Make or Buy Proposal to Publish TAG-C own layout work December 15, 2009 Outside service price for the layout page Differential cost of publishing Direct materials Direct labor Variable department overhead Cost savings from publishing TAG-C own layout $300,000 30000 255,000 55000 Outside service Cost layout pages Total cost: $15 per layout 20000 $300,000 340000 ($40,000) b) On the basis of your analysis in part (a), should the page layout work be purchased from an outside company? There is a cost saving of $10,000 from the cost analysis above for using an outside service for publishing the layout. c) What additional considerations might factor into the decision making? Other factors can be put into consideration as the productive capacity of the computer equipments. If unused capacity could be used for TAG_C to publish its own layout, there would be no increase in the total fixed department overheard cost, and only the variable factory overhead costs would be incurred. Another factor could be relying on an outside service may not alway guarantee deliverables in a timely manner if the volume is high on the printing company