Reference no: EM132708117
Problem - 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 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 $9.50 per layout page. The budget for the Publication Department is as follows:
Salaries $185,000
Benefit 50,000
Supplies 30,000
Office expenses 25,000
Office depreciation 70,000
Computer depreciation 18,000
Total $378,000
The department expects to lay out 30,000 pages. The computers used by the department 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.
Required -
a. Prepare a differential analysis report for the make-or-buy decision, considering the differential 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?