Question
The Big Bear Lumber Company is trying to decide whether to sell or process further rough-sawn lumber. The joint cost of producing the rough-sawn lumber
The Big Bear Lumber Company is trying to decide whether to sell or process further rough-sawn lumber. The joint cost of producing the rough-sawn lumber is $10,500. The following data are avaible:
| Lumber Type | Number of Boards | Selling Price per Board | Selling Price per Board | Incremental Cost to Process Further |
| At Split-Off | After Additional Processing | |||
| A | 2,000 | $8 | $12 | $7,000 |
| B | 1,000 | 16 | 20 | 6,000 |
| C | 500 | 25 | 30 | 1,000 |
a. What is the incremental effect, increase or (decrease), on operating income of processing the lumber further?
b. Which type of lumber should be processed further?
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Advanced Accounting
Authors: Debra C Jeter, Paul K Chaney
5th Edition
1118022297, 978-1118022290
