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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?

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