1 answer

Obj. 1,2 E12-7 Make-or-buy decision Wisconsin Arts of Milwaukee employs five people in its Publication Department....

Question:

Obj. 1,2 E12-7 Make-or-buy decision Wisconsin Arts of Milwaukee employs five people in its Publication Department. These peop
quoting a price of $9.50 per layout page. The budget for the Publication Departme as follows: Salaries Benefits Supplies Offi
Obj. 1,2 E12-7 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 produc- lions. 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 $9.50 per layout page. The budget for the Publication Departme as follows: Salaries Benefits Supplies Office expenses Office depreciation Computer depreciation Total $185,000 50,000 30,000 25,000 70,000 18,000 $378,000 The department expects to lay out 30,000 pages. The computers used by the depan ment have an estimated residual value of $6,500. 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 differ- ential revenues and costs. b. On the basis of your analysis in part (a), should the page layout work be purchased from an outside company? c. What additional considerations might factor into the decision making?

Answers

Dyferential Ancelyses Revenue Salvage $6500 $6500 $185000 (30000x9.5) Cost Puxhasepuce Salaries Benefits Suralis office ap OfB) Beneft pon using an outside senice is shown to be s 1500 greater than performing the layout Gock intemally The fixed cost

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