ing ll Sell or Process Further Jensen Manufacturing Company makes a partially co

Question

ing ll Sell or Process Further Jensen Manufacturing Company makes a partially completed assembly unit that it sells for $36 per unit. Normally, 42,000 units are sold each year. Variable unit cost data on the assembly are as follows: : Overview of agerial Accounting $10 Managerial unting Concepts and Flows Direct materia Direct labor Variable manufacturing overhead The company is now using only 70% of its normal capacity, it could fully use its normal capacity by processing the assembly further and : Cost Accounting ems: Job Order selling it for $43 per unit. If the company does this, material and labor costs will each increase by $2 per unit and variable overhead will go up by $1 per unit. Fixed costs will increase from the current level of $160,000 to $220,000. Prepare an analysis showing whether Jensen should process the assemblies further Use a negative sign with answer to only indicate an income loss from processing assemblies further, otherwise do not use negative signs : Cost Accounting ems: Process Costing with your answers Sell of Process Further Differential Analysis 5: Activity-Based Differential revenue Differential costs ationships Direct material 7: Variable Costing A ol for Decision Making Direct labor Variable overhead 8: Relevant Costs d Short-Term cision Making Fixed costs Additional income (loss) from processing further 9: Planning and dgeting n10: Standard Costing

Explanation / Answer

Differential analysis :

Differential revenue (42000*30/70)*43 774000 Differential cost Direct material (18000*12) 216000 Direct labour (18000*10) 180000 Variable overhead (18000*5) 90000 Fixed cost 60000 Additional income (loss) form processing further 228000

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