Chapter 11, Problem 11E

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. 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).