The Theater Arts Guild of Chicago (TAG-C) employs five people in its Publication Department. These people lay

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The Theater Arts Guild of Chicago (TAG-C) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, and other publications for the TAG-C 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 $15 per layout page. The budget for the Publication Department for 2010 is as follows:

Salaries …………………....…. $220,000

Benefits ………………….....…… 35,000

Supplies ……………………....… 30,000

Office expenses ……………… 25,000

Office depreciation ……….. 30,000

Computer depreciation ……. 22,000

Total ………………….....……. $362,000

The department expects to lay out 20,000 pages for 2010. The computers used by the department have an estimated residual value of $7,000. 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 December 15, 2009, for the makeor- buy decision, considering the 2010 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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