QUESTION 3 Partially correct 0.83 points out of 5.00 P Flag question Sell or Pro

Question

QUESTION 3 Partially correct 0.83 points out of 5.00 P Flag question 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 22:DL 01 and 02-Principles year. Variable unit cost data on the assembly are as follows Ch 1: Overview of Managerial Accounting Direct labor Accounting Concepts and Cost Flows The company is now using only y 0% of its normal capacity: it could fully use its normal capacity by processing the assembly further and 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 with your answers. Ch 3: Cost Accounting Systems: Job Order Ch 4: Cost Accounting Systems: Process Costing Sell of Process Further Differential Analysis 541,800 Costing Differential costs Ch 6: Cost-Volume-Profit Relationships 151.200 Direct labor 126,000 x Ch 7: Variable Costing: A Tool for Decision Making Variable overhead 63,000 Ch 8: Relevant Costs and Short-Term Decision Making Fixed costs 60,000 Additional income (loss) from processing further $ 228,000 X Ch 9: Planning and Budgeting Check

Explanation / Answer

DIFFERENTIAL ANALYSIS: Differential revenue (42,000 units @ (43-36)) 294000 Differential cost:; Material (42,000 units @ 2) -84000 Labour (42,000 units @ 2) -84000 Variable OH (42,000 units @ 1) -42000 Fixed cost (220,000-160,000) -60000 Additional income/(loss) 24000

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