LS CH7

ABC Lumber spent $1,000 cutting down a tree. The result was 40 unfinished logs that sell for $20.00 each and 100 bags of sawdust that sell for $1.00 each. If the unfinished logs are processed into finished lumber at a cost of $8.00 each, they will sell for $35.00. A bag of sawdust can be processed into Presto Logs that sell for $1.25 at a cost of $0.75 per bag. Which of the following statements are true concerning whether the logs should be processed into finished lumber and whether the sawdust should be processed into Presto Logs?

- The sawdust should be sold as is without being processed into Presto Logs. - The pieces of unfinished lumber should be processed

which of the following should be included in the analysis when making a decision?

Avoidable costs, Differential costs, Relevant costs

Product ABC has a contribution margin per unit of $10.00. Each unit of ABC requires 5 minutes of machine time. Product XYZ has a contribution margin per unit of $15.00 and each unit requires 10 minutes of machine time. If the company's constraint is machine hours, to maximize profit, they should first fill the demand for____.

product ABC The company should fill the demand for the product with the highest CM per unit of the constrained resource. ABC's is $2 per minute of machine time (CM of $10/5 minutes) while XYZ's is only $1.50 per minute of machine time (CM of $15/10 minutes.)

it is often possible for a manger to increase the capacity of a bottleneck, which is called ____ the constraint.

relaxing

When planning a trip and deciding to drive your car or take the train, gasoline is a:

relevant cost