Question
Sell or Process Further Turner Manufacturing Company makes a partially completed assembly unit that it sells for $52 per unit. Normally, 37,000 units are sold
Sell or Process Further Turner Manufacturing Company makes a partially completed assembly unit that it sells for $52 per unit. Normally, 37,000 units are sold each year. Variable unit cost data on the assembly are as follows:
Direct material | $12 |
Direct labor | 7 |
Variable manufacturing overhead | 9 |
The company is now using only 75% of its normal capacity; it could fully use its normal capacity by processing the assembly further and selling it for $60 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 $125,000 to $167,000.
Prepare an analysis showing whether Turner 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.
Sell of Process Further Differential Analysis | |
---|---|
Differential revenue | $Answer |
Differential costs | |
Direct material | Answer |
Direct labor | Answer |
Variable overhead | Answer |
Fixed costs | Answer |
Additional income (loss) from processing further | $Answer |
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