Raw lumber division: $125 per 100 board-feet of raw lumber Finished lumber division: $145 per 100 board-feet of finished lumber Assume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $175 per 100 board-feet. Finished lumber can be sold at $345 per 100 board-feet. 1. Should Calgary Lumber process raw lumber into its finished form? Show your calculations. 2. Assume that internal transfers are made at 130% of variable cost. Will each division maximize its divi- sion operating-income contribution by adopting the action that is in the best interest of Calgary Lumber as a whole? Explain. 3. Assume that internal transfers are made at market prices. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of Calgary Lumber as a whole? Explain. Required

Raw lumber division: $125 per 100 board-feet of raw lumber Finished lumber division: $145 per 100 board-feet of finished lumber Assume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $175 per 100 board-feet. Finished lumber can be sold at $345 per 100 board-feet. 1. Should Calgary Lumber process raw lumber into its finished form? Show your calculations. 2. Assume that internal transfers are made at 130% of variable cost. Will each division maximize its divi- sion operating-income contribution by adopting the action that is in the best interest of Calgary Lumber as a whole? Explain. 3. Assume that internal transfers are made at market prices. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of Calgary Lumber as a whole? Explain. Required

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 11E: Sell or process further Calgary Lumber Company incurs a cost of 315 per hundred board feet (hbf) in...

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