Sell or Process FurtherCalgary Lumber Company incurs a cost of $396 per hundred board feet (hbf) inprocessing certain "rough-cut" lumber, which it sells for $556 per hbf. An alternativeis to produce a "finished-cut" at a total processing cost of $524 per hbf, which canbe sold for $762 per hbf.a. Prepare a differential analysis dated March 15 on whether to sell rough-cutlumber (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 15SellRough-Cut into Finished-Cut(Alternative 1)Process FurtherDifferentialEffects(Alternative 2)(Alternative 2)Revenues, per 100 board ft.Costs, per 100 board ft.Profit (Loss), per 100 board ft.b. Determine whether to sell rough-cut lumber (Alternative 1) or process furtherinto finished-cut lumber (Alternative 2).

Differential analysis is done by calculating the incremental cash flows. Formulas:

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

Problem 1Q

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