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 available:
| Lumber Type | Number of Boards | Selling Price per Board | Incremental Cost to Process Further | |
|
|
|
At Split-Off | After Additional Processing |
|
| A | 2,000 | $ 8 | $12 | $7,000 |
| B | 1,200 | 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 of each lumber type?
b. Which type of lumber should be processed further?
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Financial Accounting
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
10th Edition
0324380674, 978-0324380675
