Structuring the Sell-or-Process-Further Decision Jack's Lumber Yard receives 8,000 large trees each period that it subsequently processes into rough logs by stripping off the tree bark and leaves. Jack's then must decide whether sell its rough logs (for use in log cabin construction) at split-off or to process them further into refined lumber (for use in regular construction framing). Jack's normally sets logs for a per-unit price of $505, Alternately, each log can be processed further into 800 board feet of lumber at an additional cost of $0.05 per board foot. Also, lumber can be sold for $0.75 per board foot. (Note: One tree is equal to one rough log.) Required: 1. What is the total contribution to income from selling the logs for log cabin construction? 2. What is the total contribution to income from processing the logs into lumber? 3. Should Jack's continue to sell the logs or process them further into lumber? Qack's should process the logs into lumber
Structuring the Sell-or-Process-Further Decision Jack's Lumber Yard receives 8,000 large trees each period that it subsequently processes into rough logs by stripping off the tree bark and leaves. Jack's then must decide whether sell its rough logs (for use in log cabin construction) at split-off or to process them further into refined lumber (for use in regular construction framing). Jack's normally sets logs for a per-unit price of $505, Alternately, each log can be processed further into 800 board feet of lumber at an additional cost of $0.05 per board foot. Also, lumber can be sold for $0.75 per board foot. (Note: One tree is equal to one rough log.) Required: 1. What is the total contribution to income from selling the logs for log cabin construction? 2. What is the total contribution to income from processing the logs into lumber? 3. Should Jack's continue to sell the logs or process them further into lumber? Qack's should process the logs into lumber
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Structuring the Sell-or-Process-Further Decision
Jack's Lumber Yard receives 8,000 large trees each period that it subsequently processes into rough logs by stripping off the tree back and leaves. Jack's then must decide whether to sell its
rough logs (for use in log cabin construction) at split-off or to process them further into refined lumber (for use in regular construction framing). Jack's normally sells logs for a per-unit price of
$505, Alternately, each log can be processed further into 800 board feet of lumber at an additional cost of $0.05 per board foot. Also, lumber can be sold for $0.75 per board foot. (Note: One Tree
is equal to one rough log.)
Required:
1. What is the total contribution to income from selling the logs for log cabin construction?
2. What is the total contribution to income from processing the logs into lumber?
3. Should Jack's continue to sell the logs or process them further into lumber?
Qack's should process the logs into lumber
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