Oregon Lumber Company incurs a cost of $465 per hundred board feet in processing

Question

Oregon Lumber Company incurs a cost of $465 per hundred board feet in processing certain "rough-cut" lumber, which it sells for $625 per hundred board feet. An alternative is to produce a "finished cut" at a total processing cost of $545 per hundred board feet, which can be sold for $850 per hundred board feet.

For these alternatives, what is the amount of (a) the differential revenue, (b) differential cost, and (c) differential income?


Differential revenue: $
Differential cost: $
Differential income:

Explanation / Answer

For these alternatives, what is the amount of (a) the differential revenue = 850 - 625 = $225 (b) differential cost = 545 - 465 = $80 (c) differential income = 225 - 80 = $145

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