Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I'm stuck on the second requirement 2 here, I've tried the numbers that you see as well as 345 and 170 as revenues and variable

image text in transcribedI'm stuck on the second requirement 2 here, I've tried the numbers that you see as well as 345 and 170 as revenues and variable costs respectively and they were wrong. Thank you ahead of time for your help!

Washington 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 $205 per 100 board-feet. Finished lumber can be sold at $345 per 100 board-feet. Read the requirements. 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 $ (30) $ 140 $ 170 Based on above, Washington Lumber should not process raw lumber into its finished form. Requirement 2. 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 Washington 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 Requirements Raw lumber division: Division revenues $ 205 130 Division variable costs 1. $ 75 Division operating income (loss) 2. Should Washington 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 Washington 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 Washington Lumber as a whole? Explain. Finished lumber division: 3. Division revenues 169 Transferred-in costs 0 130 Division variable costs Print Done 39 Division operating income (loss)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

Influences on Nonverbal Communication?

Answered: 1 week ago