Sell or Process Further

Jackson Lumber Company incurs a cost of $398 per hundred board feet in processing certain "rough-cut" lumber, which it sells for $562 per hundred board feet. An alternative is to produce a "finished cut" at a total processing cost of $528 per hundred board feet, which can be sold for $752 per hundred board feet.

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a. Prepare a differential analysis dated March 4, 2014, 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)

March 4, 2014

Sell Rough Cut (Alternative 1)

Process Further into Finished Cut (Alternative 2)

Differential Effect on Income (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).