Question

W UNE labor costs. a. Prepare a differential analysis report for the make-or-buy a b. On the basis of the data presented, would it be port for the make-or-buy decision. to continue buying them? Explain. it be advisable to make the carrying cases or Obj. 1, 2 E12-7 Make-or-buy decision Wisconsin Arts of Milwaukee employs five people i people lay out pages for pamphlets, brochures, an tions. The pages are delivered to an outside company for sidering an outside publication service for the layout work. 1 employs five people in its Publication Department. These Pamphlets, brochures, and other publications for the produc- an outside company for printing. The company is on service for the layout work. The outside service is

Answer 1

a	WISCONSIN ARTS OF MILWAUKEE
	Differential Analysis Report
		Lay Out Pages Internally	Purchase Layout Services	Differential Effect on Income
	Revenue:
	Residual value of computer equipment	-	$6,500	$6,500
	Costs:
	Purchase price of layout work:	-	($285,000)	($285,000)
	Salaries	($185,000)	-	$185,000
	Benefits	($50,000)	-	$50,000
	Supplies	($30,000)	-	$30,000
	Office expenses	($25,000)	-	$25,000
	Office depreciation	($70,000)	($70,000)	-
	Computer depreciation	($18,000)	($18,000)	-
	Income/(Loss)	($378,000)	($366,500)	$11,500
b	The benfit from using an outside service is shown to be $11,500 greater than performing the layout work internally.
	The page layout work should be purchased from outside company.
c	The Milwaukee should consider the long run impact of the decision. Specifically future page layout rates may grow
	faster than the cost of internal salaries.