Sell or Process Further

Northern Lumber Company incurs a cost of $388 per hundred board feet (hbf) in processing certain rough-cut lumber, which it sells for $550 per hbf. An alternative is to produce a finished-cut at a total processing cost of $526 per hbf, which can be sold for $768 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).

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.