The nick lumber company is in the process of deciding whether to sell or process further rough sawn lumber, the joint cost of producing the rough sawn lumber is $10,500, the following data is available.
Lumber A: number of boards 3,000, selling price per board (at split off) $16 (after additional processing) $20, incremental cost to process further $5,000
Lumber B: number of boards 2,000, selling price per board (at split off) $24 (after additional processing) $30, incremental cost to process further $6,500
Lumber C: number of boards 1,000, selling price per board (at split off) $28 (after additional processing) $32, incremental cost to process further $5,500.
a) What Is the incremental effect, increase (or decrease) on operating income of processing each type of lumber further?
b) Which type of lumber should be processed further?
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