Saber Sawmill produces rough-cut lumber from a joint process which begins with logs that they
Purchase from a logging company. Saber's management is trying to determine whether the rough-cut
Lumber should be planed and then sold as finished lumber. Which of the following is (are) relevant to
The decision faced by Saber's management?
I. The amount that Saber paid to acquire the logs.
II. The selling price of the rough-cut lumber.
III. The selling price of the planed lumber.
IV. The variable cost of planing the lumber.
V. The cost of buying a new planer.

Question

Quizplus · Accepted Answer

The selling prices of both rough-cut and planed lumber, the variable cost of planing, and the cost of a new planer are relevant to the decision as they affect the incremental costs and revenues. The amount paid for logs is a sunk cost and not relevant.

Saber Sawmill Produces Rough-Cut Lumber from a Joint Process Which