Primrose Yard Receives 15,000 Large Trees Each Year That They

question 8

Multiple Choice

Primrose Yard receives 15,000 large trees each year that they process into 15,000 rough logs.Currently, Primrose sells the rough logs for $50 each.Primrose is considering processing the logs further into refined lumber.Each log can be processed into 350 feet of refined lumber at an additional cost of $0.20 per foot.The refined lumber can be sold for $0.80 per foot.
Assume that the cost of getting the 15,000 large trees falls by half.Should Primrose sell the rough logs at split-off or process it further?

• A) It should process further because the reduction in the cost of trees makes that option more profitable than it was before.
• B) It should sell at split-off because the decrease in cost price will increase the selling price of the logs.
• C) It should sell at split-off because the reduction in the cost of the trees is irrelevant.
• D) It should process further because the cost reduction will decrease the processing cost.
• E) It should process further because the reduction in the cost of the trees is irrelevant.

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