Figure 13-8. Kerrigan Lumber Yard receives 12,000 large trees each year that they process into rough logs.Currently,Kerrigan sells the rough logs for $75 each.Kerrigan is considering processing the logs further into refined lumber.Each log can be processed into 200 feet of refined lumber at an additional cost of $0.40 per foot.The refined lumber can be sold for $0.95 per foot.
Refer to Figure 13-8.Should Kerrigan process the rough logs into refined lumber?
A)Yes,income will increase by $35 per log.
B)Yes,income will increase by $110 per log.
C)Yes,income will increase by $75 per log.
D)No,income will decrease by $35 per log.
E)No,income will decrease by $110 per log.

Question

Quizplus · Accepted Answer

The additional revenue from processing each log into refined lumber is $190 (200 feet x $0.95), and the additional cost is $80 (200 feet x $0.40). The net increase in income per log is $110 ($190 - $80), so the correct choice is A.