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:

Direct material$10Direct labor8Variable manufacturing overhead4

The company is now using only 70% of its normal capacity; it could fully use its normal capacity by processing the assembly further and selling it for $41 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 $180,000.

Prepare an analysis showing whether Jensen should process the assemblies further. Use a negative sign with answer to only indicate a loss from processing assemblies further; otherwise do not use negative signs with your answers.

Differential revenue Differential costs Direct material Direct labor Variable overhead Fixed costs Additional income (loss) from processing further