The Theater Arts Guild of Dallas (TAG-D) employs five people in its Publication

Question

The Theater Arts Guild of Dallas (TAG-D) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, magazines, and other publications for the TAG-D 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 $13.16 per layout page. The budget for the Publication Department for the current year is as follows:

$373,290

The department expects to lay out 23,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department’s function were purchased from the outside.

Salaries $224,940 Benefits 35,805 Supplies 21,180 Office expenses 39,085 Office depreciation 28,185 Computer depreciation 24,095 Total

$373,290

Explanation / Answer

A.

B. Based on the Differential Analysis in A., TAG-D should purchase the page layout work from outside. The same will result in a cost saving and thus an increase in income to the tune of $18,330.

C. Other than the financial factors, there could be certain other strategic and qualitative factors which can also influence the decision making such as losing control over the work, quality of work, delivery schedules, dependence on outside vendors. There could also be social considerations such as laying off people no longer required due to the work being outsourced.

Theatre Arts Guild of Dallas February 22 Differential Analysis Lay Out Pages Internally Purchase Layout Services Differential Effect on Income (Alternative 1) (Alternative 2) (Alternative 2) Salaries 224940 0 224940 Benefits 35805 0 35805 Supplies 21180 0 21180 Office expenses 39085 0 39085 Outside service (23000 x $13.16) 0 302680 -302680 321010 302680 18330

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