Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 $184,000 Benefits 52,000 Supplies 33,000 Office expenses 24,000 Office depreciation 53,900 Computer depreciation 35,900 Total $382,800 The department expects to lay out 31,500 pages. The computers used by the department have an estimated residual value of $23,900. 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 Differential cost of alternatives: Purchase price of layout work: Number of pages Price per page Total differential costs $o Cost to perform internally: Salaries Benefits Supplies Office expenses $ b. Which costs are irrelevant to the Wisconsin Arts decision? 1. The residual value of the computers 2. The office depreciation 3. The computer depreciation 4. The service price to the outside company Select the irrelevant cost(s) from above choices. C. What additional considerations are relevant to the Wisconsin Arts decision? 1. The impact on employees 2. Potential customer dissatisfaction with the work done by the outside service 3. Loss of direct control over the quality and timing of the layout work 4. The possibility that future layout rates could grow faster than the cost of internal salaries Select the relevant consideration(s) from the list above
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started