Planterz currently has unused productive capacity that is expected to continue indefinitely. Some of this capacity could be used to grow the saplings into small trees which can be sold for $$9($ $$2$ more than a sapling$).$ For a small tree, direct materials and direct labour will increase by $$1\mathrm{.}50$ each. Variable manufacturing overhead costs will increase by $$0\mathrm{.}25$ and fixed manufacturing overhead will not change. Should Planterz sell the saplings, or should it process them further?

The rule here is we should process further as long as the incremental revenue exceeds the incremental costs.