Question

Sell or Process Further

Jackson Lumber Company incurs a cost of $398 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $556 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $528 per hbf, which can be sold for $754 per hbf.

Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Sell Rough-Cut (Alt. 1) or Process Further into Finished Cut (Alt. 2)
August 9
	Sell Rough-Cut (Alternative 1)	Process Further into Finished Cut (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per 100 board ft.	$	$	$
Costs, per 100 board ft.
Income (Loss), per 100 board ft.	$	$	$

Answer 1

	Differential Analysis
	Sell Rough Cut (Alt1) or Process Further into Finished Cut(Alt 2)
	Aug-09
		Sell Rough Cut	Process Further into Finished Cut	Differential Effect on Income
		Alternative 1	Alternative 2	Alternative 2
	Revenue, Per 100 Baord Ft.	556.0	754.0	198.0
	Costs Per 100 Board Ft	398.0	528.0	-130.0
	Income (Loss), Per 100 Board Ft.	158.0	226.0	68.0
	Company Should choose Alternative 2 having higher Income