ch25A11

CH25a12

Northern Lumber Company incurs a cost of $250 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $300 per hbf. An alternative is to produce a "finished-cut" at a total processing cost of $315 per hbl, which can be sold for $375 per hbf, a. Prepare a differential analysis dated April 21 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). Differential Analysis b. Determine whether to sell rough-cut lumber (Aternative 1) or process further into finished-cut lumber (Alternative 2). Process further and sell finished-cut lumber Fecthack Check My Work subtracting alternative 1 from alternative 2. Differential Analysis for a Lease-or-sell Decision Stowe Construction Company is considering seling excess machinery with a book value of $25,000 (original cost of $180,000 less accumilated depreciation of $155,000 ) for $35,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $48,000 for 4 years, after which it is expected to have no residual value. During the period of the lease, Stowe Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $12,000. a. Prepare a differential analysis dated March 21 to determine whether Stowe Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. b. On the basis of the data presented, would it be advisabie to lease or sell the machinery? 7 check My Work Subtract the lease costs from the lease revenues. Subtract the sell machine costs from the sell machine revenue. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2