Chap lo Sell or Process Further Calgary Lumber Company incurs a cost of $376 per

Question

Chap lo Sell or Process Further Calgary Lumber Company incurs a cost of $376 per hundred board feet (hbf) in processing certain "rough-cut lumber, which it sells for $560 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $520 per hbf, which can be sold for $762 per hbf. a. Prepare a differential analysis dated March 15, on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2) Differential Analysis Sell Rough-Cut (Alt. 1) or Process Further into Finished-Cut (Alt. 2) Process Further Differential Sell Rough-Cut into Finíshed-cut Effect on Income ernatve ) (Alternative 2) (Alternative 2) Costs, per unit Income (Loss), per unit. b. Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

Explanation / Answer

Sell rough cut Process further into Finished cut Differential effect on income Revenues, per unit 560 762 202 Costs, per unit -376 -520 -144 Income(loss), per unit 184 242 58 Jackson Lumber Company should process further and sell finished-cut lumber.

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