Question

Sell or process further Instructions Amount Descriptions Differential Analysis Final Question Instructions Portland Lumber Company incurs a cost of $450 per hundred board feet (hbf) in processing certain rough-cut" lumber, which it sells for $606 per hbf. An ahermative is to produce a Tnished cut at a total processing cost of $543 per hbf, which can be sold for $737 per hbf Required: 1. Prepare a diferential analysis dated June 14 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Altemative 2). Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign, If there is no amount or an amount is zero, enter 0" A colon () wi automatically appear if required 2 Detemine whether the company should sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

Answer 1

Correct Answer:

Differential Analysis
Sell rough cut (Alternative 1) or process further into finished cut (Alternative 2)
	Sell rough cut	process further into finished cut	Differential Effect on Income
	(Alternative 1)	(Alternative 2)	(Alternative 2)
Revenues	$ 606	$ 737	$ 131
Costs:
Variable cost of goods sold	$ 450	$ 543	$ 93
Variable selling and admin. expenses	0	0	$ 0
Fixed costs	0	0	$ 0
Income (Loss)	$ 156	$ 194	$ 38

2: the company should process further and sell finished cut lumber

End of answer.

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