Question

Calgary Lumber Company incurs a cost of $465 per hundred board feet (hbf) in processing certain “rough-cut” lumber, which it sells for $630 per hbf. An alternative is to produce a “finished cut” at a total processing cost of $566 per hbf, which can be sold for $766 per hbf.

	Required:
1.	Prepare a differential analysis dated March 15 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 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.
2.	Determine whether the company should sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

Differential Analysis

Sell Rough Cut (Alternative 1) or Process Further into Finished Cut (Alternative 2)

March 15

1		Sell Rough-Cut	Process Further into Finished-Cut	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3	Revenues, per unit
4	Costs, per unit
5	Income (loss), per unit

Answer 1

	Sell	Process further
Revenues	630	766	136
Costs	465	566	-101
Income(Loss)	165	200	35

Process further