Question
Calgary Lumber has a raw lumber division and a finished lumber division. The variable costs are: -Raw lumber division: $130 per 100 board-feet of raw
Calgary Lumber has a raw lumber division and a finished lumber division. The variable costs are:
-Raw lumber division: $130 per 100 board-feet of raw lumber
-Finished lumber division: $155 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 a $255 per 100 board-feet. Finished lumber can be sold at $330 per 100 board-feet.
3. Assume that interal 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 while? Explain.
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