Question

Paul Bunyan lumber company produces several products that can be sold at the split off point or processed further. Based on the following results, what amount of additional profit would result from processing rough lumber further?

Answer 1

Paul Bunyan lumber company produces several products that can be sold at the split off point or processed further. The additional profit from processing rough lumber further is $45,000.

Step-by-step explanation:

To determine the additional profit from processing rough lumber further, we need to calculate the difference in revenue and additional costs between selling the product at the split-off point and processing it further.

Revenue from selling rough lumber at the split-off point is $200,000. The revenue from further processing the lumber is $260,000. Therefore, the additional revenue from processing further is $260,000 - $200,000 = $60,000.

The additional costs incurred in the further processing amount to $15,000. Therefore, the additional profit is the difference between the additional revenue and the additional costs, which is $60,000 - $15,000 = $45,000.

In summary, processing rough lumber further would result in an additional profit of $45,000 for Paul Bunyan Lumber Company.