Calgary Lumber has a Raw Lumber Division and a Finished Lumber Division. The variable costs?are:
? Raw Lumber?Division: $120 per 100 board feet of raw lumber
? Finished Lumber?Division: $150 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 $220 per 100 board feet. Finished lumber can be sold at $250 per 100 board feet
Calgary Lumber has a Raw Lumber Division and a Finished Lumber Division. The variable costs are: . Raw Lumber Division: $120 per 100 board feet of raw lumber Finished Lumber Division: $150 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 $220 per 100 board feet. Finished lumber can be sold at $250 per 100 board feet. Requirements Requirement 1. Should Calgary 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.) Gain/(Loss) on further processing Based on above, Calgary Lumber process raw lumber into its finished form. Requirement 2. Assume that internal transfers are made at 125% of variable cost. 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 an amount in each input cell. Use parentheses or a minus sign when entering losses.) Sell as Sell as Raw Lumber Finished Lumber Raw Lumber Division: Raw Lumber Division revenues Division:Division variable costs Division operating income (loss) Finished Lumber Division: Division revenues Finished _ Lumber Transfen'ed-rn costs Division: Division variable costs Division operating income (loss) Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of Calgary Lumber as a whole? Explain. The Raw Lumber Division will maximize reported division operating income by j, which R the action preferred by the company as a whole. The Finished Lumber Division will maximize division operating income by l: , which E the action preferred by the company as a whole. Requirement 3. Assume that internal transfers are made at market prices. Begin by calculating each division's operating-income under both actions. Start with the decision to sell as raw lumber. (Enter an amount in each input cell. Use parentheses or a minus sign when entering losses.) Sell as Sell as Raw Lumber Finished Lumber Raw Lumber Division: Raw Lumber Division revenues Division: Division variable costs Division operating income (loss) Finished Lumber Division: Division revenues Finished Lumber Division: Transferred-in costs Division variable costs Division operating income (loss) Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of Calgary Lumber as a whole? Explain. The Raw Lumber Division will maximize reported division operating income by 'Vl, which j the action preferred by the company as a whole. The Finished Lumber Division will maximize division operating income by V , which El the action preferred by the company as a whole. . Should Calgary Lumber process raw lumber into its nished form? Show your calculations. . Assume that internal transfers are made at 125% of variable cost. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of Calgary 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 Calgary Lumber as a whole? Explain
