Question

Paul Bunyon Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period: Sales Value Additional Sales Value After Product at Split-off Variable Costs Further Processing Green lumber $159,600 $24,000 $178,000 Rough lumber 124,000 28,200 173,600 Sawdust 102,000 19,600 130,000

What is the increase in profit if the appropriate products are processed further?

Answer 1

Answer:

Green Lumber

Explanation:

For computing the increase in profit, first, we have to compute the contribution margin which is shown below:

Contribution margin = Sales Value  +  Additional Sales Value - Variable Costs

So,

For Green Lumber = $159,600 + $24,000 - $178,000 = $5,600

For Rough Lumber = $124,000 + $28,200 -  $173,600 = ($21,400)

For Sawdust = $102,000 + $19,600 -  $130,000 = (8,400)

By this computation,we can interpret that Green lumber should be processed further as it has positive contribution margin and the other two would not be as it have negative contribution margin

Answer 2

The increase in profit if the appropriate products are processed further by Paul Bunyon Lumber Co is $5,600.

What does the further processing cost?

Further processing attracts more processing costs.  The company should analyze if to pursue further processing based on the sales value realized after further processing and the costs of further processing.

Data and Calculations:

                                          Green Lumber      Rought Lumber   Sawdust

Sales Value                            $159,600               $124,000        $102,000

Additional Sales Value

After Product at Split-off         24,000                  28,200             19,600

Variable Costs Further

Processing                             178,000                 173,600          130,000

Increase in profit                     $5,600               ($21,400)          ($8,400)

Thus, the increase in profit if the appropriate products are processed further is $5,600 because only the Green Lumber would be processed further.

Learn more about further processing costs at https://brainly.com/question/24516871