t: C hapter 24 Homework Assignment Score: 20.83% uctor Save Exit Submit Assignme
ID: 2467340 • Letter: T
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t: C hapter 24 Homework Assignment Score: 20.83% uctor Save Exit Submit Assignment for Grading Exercise 24-8 uestion 4 of 8 Check My Work (4 remaining) eBook Make-or-Buy Decision 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 $13 per layout page. The budget for the Publication Department for 2014 is as follows: Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation $224,000 36,000 21,000 39,000 28,000 24,000 $372,000 The department expects to lay out 25,000 pages for 2014. The computers used by the department have an estimated residual value of $9,000. The Publication Department office space and equipment would be used for future administrative needs, if the department's function were purchased from the outside. Hide a. Prepare a differential analysis dated February 22, 2014, to determine whether TAG-D should lay out pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter zero "O".Explanation / Answer
b.
Therefore the benefit from using an outside service is shown to be less than performing the layout work internally. The fixed cost (depreciation expenses) in the budget is irrelevant to the decision. Thus the work should not be purchased from outside on a strictly financial basis.
Differential Analysis Layout pages Internally(Alt.1)or purchase layout services (Alt.2) Layout pages internally (Alternative 1) Purchase Layout services (Alternative 2) Deferrential effect on Income (Alternative 2) Revenues salvage of computer equipment $ 9,000 $ 9,000 Cost: Purchase price of layout work $(325,000) $(325,000) Salaries $ 224,000 $ 224,000 Benefits $ 36,000 $36,000 Supplies $ 21,000 $21,000 Office expenses $39,000 $(39,000) $- Office depreciation $ 28,000 $(28,000) $ - Computer depreciation $ 24,000 $ - $ 24,000 Income/(Loss) $372,000 $(383,000) $(11,000)Related Questions
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