Calgary Lumber Company incurs a cost of $388 per hundred board feet (hbf) in processing certain “rough-cut” lumber, which it sells for $550 per hbf. An alternative is to produce a “finished cut” at a total processing cost of $520 per hbf, which can be sold for $748 per hbf. a.  Prepare a differential analysis dated March 15, 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 15   Sell Rough-Cut (Alternative 1) Process Further into Finished-Cut (Alternative 2) Differential Effect on Income (Alternative 2) Revenues, per unit $fill in the blank f0f0a4fd6062f85_1 $fill in the blank f0f0a4fd6062f85_2 $fill in the blank f0f0a4fd6062f85_3 Costs, per unit fill in the blank f0f0a4fd6062f85_4 fill in the blank f0f0a4fd6062f85_5 fill in the blank f0f0a4fd6062f85_6 Income (Loss), per unit $fill in the blank f0f0a4fd6062f85_7 $fill in the blank f0f0a4fd6062f85_8 $fill in the blank f0f0a4fd6062f85_9 b.  Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

Question

Sell or Process Further

Calgary Lumber Company incurs a cost of $388 per hundred board feet (hbf) in processing certain “rough-cut” lumber, which it sells for $550 per hbf. An alternative is to produce a “finished cut” at a total processing cost of $520 per hbf, which can be sold for $748 per hbf.

a.  Prepare a differential analysis dated March 15, 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 15
  Sell Rough-Cut
(Alternative 1)
Process Further
into Finished-Cut
(Alternative 2)
Differential
Effect on Income
(Alternative 2)
Revenues, per unit $fill in the blank f0f0a4fd6062f85_1 $fill in the blank f0f0a4fd6062f85_2 $fill in the blank f0f0a4fd6062f85_3
Costs, per unit fill in the blank f0f0a4fd6062f85_4 fill in the blank f0f0a4fd6062f85_5 fill in the blank f0f0a4fd6062f85_6
Income (Loss), per unit $fill in the blank f0f0a4fd6062f85_7 $fill in the blank f0f0a4fd6062f85_8 $fill in the blank f0f0a4fd6062f85_9

b.  Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).
 

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