Tamarisk Sawmill Co. runs rough logs through its cutting facility for the primary purpose of producing hardwood lumber. In this process, however, not all of the wood is of high enough quality to be sold as hardwood lumber. The other joint product, lower-grade lumber, has been sold as-is to other manufacturers to make wood pallets. Last year, the following quantities and sales prices were reported.

Joint process costs $461,000 (including timber logs)

Quantities produced 99,000 board feet of hardwood lumber

20,000 board feet of low-grade lumber

Sales prices at split off $8.00 per board foot for hardware lumber

$2.50 per board foot for low-grade lumber

Paul, the sawmill owner, is meeting with other top managers as they consider avenues for increased profitability. They recognize that selling the lower-grade wood to other companies has certainly helped the mill's bottom line. However, they wonder if they could further process this wood themselves and make even more of a return.

If the company had used the physical quantities method instead of the sales value at split-off method for allocating joint costs, how would it have affected your analysis in parts (b) and (c)?

(b) The company (should/should not) process the low-grade lumber further into wood chips. It would be better off/worse off financially by $_________ if it did process it further.

(c) The company (should/should not) process the low-grade lumber further into wood chips. It would be better off/worse off financially by $_________ if it did process it further.