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bagirrra123 [75]
3 years ago
11

Big Fork Lumber Company incurs a cost of $402 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it se

lls for $540 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $523 per hbf, which can be sold for $668 per hbf. Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).
Business
1 answer:
Mazyrski [523]3 years ago
7 0

Answer and Explanation:

The preparation of the differential analysis is presented below:

<u>Particulars    Sell Rough cut    Process             Differential </u>

<u>                      (Alternative 1)     Further into           Effect on income</u>

<u>                                                 Finished cut        (Alternative 2)</u>

<u>                                             (Alternative 2)</u>

Revenues

per 100 board feet     $540     $668              $128

Cost per $100

Board ft                      -$402     -$523           -$121

Income

or loss

per 100 board             $138      $145               $7

In the case when the product would get process further so there is an increase in revenue by $7

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