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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

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 $12.89 per layout page. The budget for the Publication Department for the current year is as follows: Salaries $224,000 Benefits 35,870 Supplies 20,875 Office expenses 38,860 Office depreciation 28,160 Computer depreciation 24,040 Total $371,805 The department expects to lay out 24,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the departments function were purchased from the outside.

A. Prepare a differential analysis dated February 22 to determine whether TAG-D should lay out pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.

Differential Analysis

Lay Out Pages Internally (Alternative 1) or Purchase Layout Services (Alternative 2)

February 22

1

Lay Out Pages Internally

Purchase Layout Services

Differential Effect on Income

2

(Alternative 1)

(Alternative 2)

(Alternative 2)

3

4

5

6

7

8

9

10

11

B. On the basis of your analysis in part (A), should the page layout work be purchased from an outside company?

The benefit from using an outside service is shown to be $10,245 than performing the layout work internally. The fixed costs (depreciation expenses) in the budget are to the decision. Thus, the work should purchased from the outside on a strictly financial basis.

C. What additional considerations might factor into the decision making?

Long-term employee morale

All of these are important additional considerations

Long-term employee productivity

The ability to more directly control the quality and timing of the layout work by internal employees

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