Jack\'s Lumber Yard receives 8,000 large trees each period that it subsequently

Question

Jack's Lumber Yard receives 8,000 large trees each period that it subsequently processes into rough logs by stripping off the tree bark and leaves (i.e., one tree equals one log). Jack's then must decide whether to sell its rough logs (for use in log cabin construction) at split-off or to process them further into refined lumber (for use in regular construction framing). Jack's normally sells logs for a per-unit price of $500. Alternately, each log can be processed further into 800 feet of lumber at an additional cost of $0.15 per board foot. Also, lumber can be sold for $0.75 per board foot.

So if the contribution income from selling the logs for log cabin construction is 500*8000=4,000,000

What is the contribution to income from processing the logs into lumber?

Explanation / Answer

Hi,

Contribution to income from processing the logs into lumber = 8000*800*(.75 - .15) = 3840000

Since, the contributin from further processing is less than income from selling logs for log cabin construction, it is advisable to sell the logs instead of further processing.

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.