Sell or Process Further

Northern Lumber Company incurs a cost of $$400$ per hundred board feet $($hbf$)$ in processing certain $$rough$-$cut$$ lumber, which it sells for $$560$ per hbf$.$ An alternative is to produce a $$finished$-$cut$$ at a total processing cost of $$530$ per hbf$,$ which can be sold for $$742$ per hbf$.$

Question Content Area

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

Sell Rough$-$Cut $($Alt$.1)$ or Process Further into Finished$-$Cut $($Alt$.2)$

April $21$

Line Item Description Sell Rough$-$Cut

$($Alternative $1)$ Process Further

into Finished$-$Cut

$($Alternative $2)$ Differential Effects

$($Alternative $2)$

Revenues, per $100$ board ft$.$ $Revenues, per $100$ board ft$.$

$Revenues, per $100$ board ft$.$

$Revenues, per $100$ board ft$.$

Costs, per $100$ board ft$.$ Costs, per $100$ board ft$.$

Costs, per $100$ board ft$.$

Costs, per $100$ board ft$.$

Profit $($Loss$),$ per $100$ board ft$.$ $Profit $($Loss$),$ per $100$ board ft$.$

$Profit $($Loss$),$ per $100$ board ft$.$

$Profit $($Loss$),$ per $100$ board ft$.$

Question Content Area

b$.$ Determine whether to sell rough$-$cut lumber $($Alternative $1)$ or process further into finished$-$cut lumber $($Alternative $2).$