The Wisconsin Arts of Milwaukee employs five people in its
The 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 $12.50 per layout page.
The budget for the Publication Department for 2013 is as follows:
Salaries .......... $185,000
Benefits ............ 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 for 2013. 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.
a. Prepare a differential analysis report, dated September 24, 2012, for the make-or-buy decision, considering the 2013 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?

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