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
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Sell or Process Further
Jensen Manufacturing Company makes a partially completed assembly unit that it sells for $44 per unit. Normally, 38,000 units are sold each year. Variable unit cost data on the assembly are as follows:
| Direct material | $10 |
| Direct labor | 8 |
| Variable manufacturing overhead | 4 |
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 $51 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 $225,000.
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.
| 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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