Make-or-Buy Decision Wisconsin Arts of Milwaukee employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, and other publications for the production. 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 $a per layout page. The budget for the Publication Department is as follows: Salaries $183,000 Benefits 47,000 Supplies 29,000 Office expenses 24,000 Office depreciation 48,600 Computer depreciation 32,400 Total $364,000 The department expects to lay out 27,000 pages. The computers used by the department have an estimated residual value of $21,600. The Publication Department office space would be used for future administrative needs if the department's function were purchased from the outside. a. Prepare a differential analysis report for the make-or-buy decision, considering the differential revenues and costs. WISCONSIN ARTS OF MILWAUKEE Purchase Outside Page Layout Services Differential Analysis Report Differential revenue: Residual value of computer equipment 21,600 Differential cost of alternatives: Purchase price of layout work: Number of pages 27,000 Price per page X $ Total differential costs Cost to perform internally: Salaries $ 183,000 Benefits 47,000 Supplies 29,000 Office expenses 24,000 283,000 Cost increase from purchasing outside layout services Net differential loss from using an outside service Make-or-Buy Decision Wisconsin Arts of Milwaukee employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, and other publications for the production. 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 $a per layout page. The budget for the Publication Department is as follows: Salaries $183,000 Benefits 47,000 Supplies 29,000 Office expenses 24,000 Office depreciation 48,600 Computer depreciation 32,400 Total $364,000 The department expects to lay out 27,000 pages. The computers used by the department have an estimated residual value of $21,600. The Publication Department office space would be used for future administrative needs if the department's function were purchased from the outside. a. Prepare a differential analysis report for the make-or-buy decision, considering the differential revenues and costs. WISCONSIN ARTS OF MILWAUKEE Purchase Outside Page Layout Services Differential Analysis Report Differential revenue: Residual value of computer equipment 21,600 Differential cost of alternatives: Purchase price of layout work: Number of pages 27,000 Price per page X $ Total differential costs Cost to perform internally: Salaries $ 183,000 Benefits 47,000 Supplies 29,000 Office expenses 24,000 283,000 Cost increase from purchasing outside layout services Net differential loss from using an outside service
