Woody, Inc. processes wooden logs into boards and sawdust. A wooden log costs $10 to buy...

Woody, Inc. processes wooden logs into boards and sawdust. A wooden log costs $10 to buy from log cutters and $6 to process to the splitoff point. The boards can be sold at the splitoff point for $12 or processed further for $10 to make a finished board that is sold for $18. The saw dust can be sold at the splitoff point for $5 or processed further for $3 to make wood pellets (used in wood-burning heaters) that is sold for $10. What is the financial advantage (disadvantage) for the company from processing the sawdust into wood pellets rather than selling it as is?

Multiple Choice

$(14)
$2
$(4)
$(2)

Solutions

Expert Solution

	Sold at Split off	Processed further	Advantage
Selling price	$ 5	$ 10
Less - Cost for processing	$ -	$ (3)
Net Income	$ 5	$ 7	$ 2

ekkarill92 answered 1 year ago

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