Question

6) BC Logging corporation sells chips and logs to mills around BC. Every load of chips they sell has a selling price of $1500 and variable costs of $1150. Every load of logs they sell has a selling price of $800 and variable costs of $500. They sell 6 loads of logs for every 3 loads of chips. Fixed costs are $450,000.

a) If BC logging corporation delivers 2,000 total loads what is their operating income/loss?

b) Create a contribution margin income statement for your answer in question A)

c) What is BG Logging corporations contribution margin ratio?

d) What is BC Logging corporation’s break even point in sales dollars? What is it in total loads?

e) BC Logging Corporation is interested in harvesting from a site that is out of their normal operating area. The extra distance each load is driven will increase variable costs by $30 per load. It will cost BC Logging corporation $130,000 to buy the rights to harvest the site. Harvesting from this site will increase BC Logging Corporations total loads sold by 500. What effect would harvesting from the site have on BC Logging Corporations Operating Income? Should they do it?

Answer 1