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?

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

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