$23-17$ TRANSFEER$-$PRICING METHODS, GOAL

CONGRUENCE. Vancouver Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows:

Raw lumber division: $$120$ per $100$ board$-$feet of raw lumber

Finished lumber division: $$145$ per $100$ board$-$feet of finished lumber

Assume that there is no board$-$feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $$170$ per $100$ board$-$feet. Finished lumber can be sold at $$370$ per $100$ board$-$feet.

Required

Should Vancouver Lumber process raw lumber into its finished form? Show your calculations.

Assume that internal transfers are made at $130\%$ of variable cost. Will each division maximize its division operating$-$income contribution by adopting the action that is in the best interest of Vancouver Lumber as a whole? Explain.

Assume that internal transfers are made at market prices. Will each division maximize its division operating$-$income contribution by adopting the action that is in the best interest of Vancouver Lumber as a whole? Explain.