Sell or Process Further Jackson Lumber Company incurs a cost of $394 per hundred

Question

Sell or Process Further

Jackson Lumber Company incurs a cost of $394 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $548 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $523 per hbf, which can be sold for $758 per hbf.

Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis Sell Rough Cut (Alt. 1) or Process Further into Finished Cut (Alt. 2) August 9 Differential Effect Process Rough CutFinished Cut on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues, per 100 board ft. Costs, per 100 board ft. Income (Loss), per 100 board ft. 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 Differential Alternative -1 Finished Cut Effect on Income Alternative-2 Revenue per 100 board ft 548 758 210 Cost per 100 board ft -394 -523 -129 Income /(Loss) per 100 board ft. 942 1281 81 Process Further in to Finished Cut-Alternative 2 shall be selected.

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