Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

SELL OR PROCESS FURTHER Andre operates a sawmill that produces chips of bark as a by-product of sawing wood. Delaney sells to chips to another

image text in transcribed

SELL OR PROCESS FURTHER Andre operates a sawmill that produces chips of bark as a by-product of sawing wood. Delaney sells to chips to another company at a price of $0.12 per cubic foot of bark. In a typical month, Andre sells $900,000(7,500,000 cubic feet) worth of bark. Andre is considering renting equipment that would process the chips of bark and then bag them for sale to landscapers. Costs to rent the equipment to process and bag the bark and the costs of the personnel to operate the equipment are $500,000 per month. These costs are fixed regardless of the amount or type of bark that Andre processes. The only variable cost to process the bark is the bag, which costs $0.05 per cubic foot of bark. In a typical month, Andre estimates that 30 percent of the chips would carry a grade of "Large" and sell for $0.32 per cubic foot and that 70 percent of the chips would carry a grade of "Small" and sell for $0.16 per cubic foot. Assuming a typical month, what is the NOI advantage or disadvantage of processing 7,500,000 cubic feet of bark into landscaping chips

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

Draw a schematic diagram of I.C. engines and name the parts.

Answered: 1 week ago

Question

to encourage a drive for change by developing new ideas;

Answered: 1 week ago

Question

4 What are the alternatives to the competences approach?

Answered: 1 week ago