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The Big Bear Lumber Company is trying to decide whether to sell or process further rough-sawn lumber. The joint cost of producing the rough-sawn lumber is $10,500. The following data are available:

Lumber Type A B C
Number of Boards 2,000 1,000 500
Selling price per board - after split off $8 16 25
after additional processing $12 20 30
Incremental cost to process further $7,000 6,000 1,000

a. What is the incremental effect, increase or (decrease), on operating income of processing the lumber further?

b. which type of lumber should be processed further?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M939236

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