The Big Bear Lumber Company Is Trying to Decide Whether

question 39

Essay

The Big Bear Lumber Company is trying to decide whether to sell or process further rough-sawn lumber. The joint cost of producing the rough-sawn lumber is $10,500. The following data are available:
$\begin{array}{|c|c|c|c|c|}\hline \text { Lumber Type } & \text { Nunber of Boards } & \text { Selling Price per Board } & \begin{array}{l}\text { Tncremental Cost to } \\\text { Process Further }\end{array} & \\\hline & & \text { At Split-Off } & \begin{array}{l}\text { After Additional } \\\text { Processing }\end{array} & \\\hline \text { A } & 2,000 & \$ 8 & \$ 12 & \$ 7,000 \\\hline \text { B } & 1,000 & 16 & 20 & 6,000 \\\hline \mathrm{C} & 500 & 25 & 30 & 1,000 \\\hline\end{array}$
a. What is the incremental effect, increase or (decrease), on operating income of processing the lumber further?
b. Which type of lumber should be processed further?

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Definitions:

Unfounded Belief

An unfounded belief is an assumption or conviction held without evidence or basis in fact.

Drug Dependence

A physical or psychological need for regular use of a substance despite harmful consequences, often leading to addiction.

Disease

A disorder of structure or function in a human, animal, or plant, especially one that produces specific symptoms or affects a specific location and is not simply a direct result of physical injury.

Psychodynamic Therapy

A form of depth psychology, focusing on the unconscious mind and childhood experiences, and uses this framework to treat mental illness.