Sell or Process FurtherCalgary Lumber Company incurs a cost of $315 per hundred board feet (hbf) in processing certain “rough-cut” lumber, which it sells for $440 per hbf. An alternative is to produce a “finished-cut” at a total processing cost of $465 per hbf, which can be sold for $600 per hbf.a. Prepare a differential analysis dated March 15 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).Differential AnalysisSell Rough-Cut (Alt. 1) or Process Further into Finished-Cut (Alt. 2)March 15 SellRough-Cut(Alternative 1)Process Furtherinto Finished-Cut(Alternative 2)DifferentialEffects(Alternative 2)Revenues, per 100 board ft.$fill in the blank 9a3a05fa8fb205a_1$fill in the blank 9a3a05fa8fb205a_2$fill in the blank 9a3a05fa8fb205a_3Costs, per 100 board ft.fill in the blank 9a3a05fa8fb205a_4fill in the blank 9a3a05fa8fb205a_5fill in the blank 9a3a05fa8fb205a_6Profit (Loss), per 100 board ft.$fill in the blank 9a3a05fa8fb205a_7$fill in the blank 9a3a05fa8fb205a_8$fill in the blank 9a3a05fa8fb205a_9 b. Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

SOLUTION- DIFFERENCIAL ANALYSIS IS A MANAGEMENT ACCOUNTING TECHNIQUE IN WHICH WE EXAMINE ONLY THE CHANGES IN REVENUE , COSTS AND PROFITS THAT RESULT FROM A BUSINESS DECISION INSTEAD OF CREATING COMPLETE INCOME STATEMENTS FOR EACH ALTERNATIVES.ANSWER-A STATEMENT OF DIFFERENCIAL ANALYSIS PARTICULARS SELL ROUGH -CUT (ALTERNATIVE-1) (A) PROCESS FURTHER INTO FINISHED CUT (ALTERNATIVE-2) (B) DIFFERENCIAL EFFECT ON INCOME (ALTERNATIVE-2) (B-A) REVENUE PER UNIT 440 600 160 LESS- COST PER UNIT (315) (465) (150) INCOME (LOSS) , PER UNIT 125 135 10ANSWER-B IT IS ADVISABLE TO PROCESS FURTHER INTO FINISHED CUT (ALTERNATIVE -2). SO AS TO EARN INCREMENTAL INCOME OF 10 .

Answered: Sell or Process Further Calgary Lumber…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Sell or Process Further

Calgary Lumber Company incurs a cost of $315 per hundred board feet (hbf) in processing certain “rough-cut” lumber, which it sells for $440 per hbf. An alternative is to produce a “finished-cut” at a total processing cost of $465 per hbf, which can be sold for $600 per hbf.

a. Prepare a differential analysis dated March 15 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

Differential AnalysisSell Rough-Cut (Alt. 1) or Process Further into Finished-Cut (Alt. 2)March 15

	Sell Rough-Cut (Alternative 1)	Process Further into Finished-Cut (Alternative 2)	Differential Effects (Alternative 2)
Revenues, per 100 board ft.	$fill in the blank 9a3a05fa8fb205a_1	$fill in the blank 9a3a05fa8fb205a_2	$fill in the blank 9a3a05fa8fb205a_3
Costs, per 100 board ft.	fill in the blank 9a3a05fa8fb205a_4	fill in the blank 9a3a05fa8fb205a_5	fill in the blank 9a3a05fa8fb205a_6
Profit (Loss), per 100 board ft.	$fill in the blank 9a3a05fa8fb205a_7	$fill in the blank 9a3a05fa8fb205a_8	$fill in the blank 9a3a05fa8fb205a_9

b. Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

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