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:
$\begin{array}{|c|c|c|c|c|}
\hline \text { Lumber Type } & \text { Nunber of Boards } & \text { Selling Price per Board } & \begin{array}{l}
\text { Tncremental Cost to } \
\text { Process Further }
\end{array} & \
\hline & & \text { At Split-Off } & \begin{array}{l}
\text { After Additional } \
\text { Processing }
\end{array} & \
\hline \text { A } & 2,000 & \$ 8 & \$ 12 & \$ 7,000 \
\hline \text { B } & 1,000 & 16 & 20 & 6,000 \
\hline \mathrm{C} & 500 & 25 & 30 & 1,000 \
\hline
\end{array}$
a. What is the incremental effect, increase or (decrease), on operating income of processing the lumber further?
b. Which type of lumber should be processed further?

Question

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:
 $\begin{array}{|c|c|c|c|c|}
\hline \text { Lumber Type } & \text { Nunber of Boards } & \text { Selling Price per Board } & \begin{array}{l}
\text { Tncremental Cost to } \
\text { Process Further }
\end{array} & \
\hline & & \text { At Split-Off } & \begin{array}{l}
\text { After Additional } \
\text { Processing }
\end{array} & \
\hline \text { A } & 2,000 & \$ 8 & \$ 12 & \$ 7,000 \
\hline \text { B } & 1,000 & 16 & 20 & 6,000 \
\hline \mathrm{C} & 500 & 25 & 30 & 1,000 \
\hline
\end{array}$
 a. What is the incremental effect, increase or (decrease), on operating income of processing the lumber further?
b. Which type of lumber should be processed further?

Quizplus · Accepted Answer

The Answer of 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:
 $\begin{array}{|c|c|c|c|c|}
\hline \text { Lumber Type } & \text { Nunber of Boards } & \text { Selling Price per Board } & \begin{array}{l}
\text { Tncremental Cost to } \
\text { Process Further }
\end{array} & \
\hline & & \text { At Split-Off } & \begin{array}{l}
\text { After Additional } \
\text { Processing }
\end{array} & \
\hline \text { A } & 2,000 & \$ 8 & \$ 12 & \$ 7,000 \
\hline \text { B } & 1,000 & 16 & 20 & 6,000 \
\hline \mathrm{C} & 500 & 25 & 30 & 1,000 \
\hline
\end{array}$
 a. What is the incremental effect, increase or (decrease), on operating income of processing the lumber further?
b. Which type of lumber should be processed further?

The Big Bear Lumber Company Is Trying to Decide Whether