The Big Bear Lumber Company is trying to decide whether to sell or process further...
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Accounting
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
Number of Boards
Selling Price per Board
Incremental Cost to Process Further
At Split-Off
After Additional Processing
A
2,000
$ 8
$12
$7,000
B
1,200
16
20
6,000
C
500
25
30
1,000
a. What is the incremental effect, increase or (decrease), on operating income of processing the lumber further of each lumber type?
b. Which type of lumber should be processed further?
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