British Columbia Lumber has a raw lumber division and a finished lumber division. The variable costs are as? follows:

Raw lumber? division: $ 130 per 100? board-feet of raw lumber Finished lumber? division: $ 170 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 $ 255 per 100? board-feet. Finished lumber can be sold at $270 per 100? board-feet.British Columbia Lumber has a raw lumber division and a finished lumber division. The variable costs are as? follows:

Raw lumber? division:$130per 100? board-feet of raw lumber Finished lumber? division:$170 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 $255 per 100? board-feet. Finished lumber can be sold at $270 per 100? board-feet.

Requirement 1. Should British Columbia Lumber process raw lumber into its finished? form? Show your calculations.

Begin by selecting the formula you will use to make your decision. Then enter the amounts in the formula. ?(Use parentheses or a minus sign when entering? losses.)

Incremental revenues

-

Incremental costs

=

Gain/(loss) on further processing

$15

-

$170

=

$(155)

Based on? above, British Columbia Lumber should not process raw lumber into its finished form.

Requirement 2. Assume that internal transfers are made at 120% of variable cost. Will each division maximize its division? operating-income contribution by adopting the action that is in the best interest of British Columbia Lumber as a? whole? Explain.

Begin by calculating each? division's operating income under both actions. Start with the decision to sell as raw lumber. ?(Round your answers to the nearest whole dollar. Enter a? "0" for amounts with a zero value. Use parentheses or a minus sign when entering? losses.)

	Sell as
	raw lumber
Raw lumber division:
Division revenues	$255
Division variable costs	130
Division operating income (loss)	$125
Finished lumber division:
Division revenues	$0
Transferred-in costs	0
Division variable costs	0
Division operating income (loss)	$0

	Sell as
	finished lumber
Raw Lumber Division:
	$156
	130
	$26
Finished Lumber Division:
	$270
	156
	170
	$(56)

Will each division maximize its division? operating-income contribution by adopting the action that is in the best interest of British Columbia Lumber as a? whole? Explain.

The raw lumber division will maximize reported division operating income by (Selling Raw Lumber/ Either selling raw lumbar or processing further/ Processing raw lumbar further), Which (Coinsides with/ Is contrary to) the action preferred by the company as a whole.

The finished lumber division will maximize division operating income by (), Which () The action preferred by the company as a whole.

3. 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 British Columbia Lumber as a? whole? Explain

The raw lumber division will maximize reported division operating income by (Selling Raw Lumber/ Either selling raw lumbar or processing further/ Processing raw lumbar further), Which (Coinsides with/ Is contrary to) the action preferred by the company as a whole.

The finished lumber division will maximize division operating income by (), Which () The action preferred by the company as a whole.