MULTIPLE CHOICE 12 71
Bonner Milling Company purchases logs and mills them into various grades of lumber. During the sawing and planing process, a considerable amount of sawdust is generated. Currently, Bonner sells the sawdust to a particle board manufacturer for $50 per truckload. Bonner is considering processing the sawdust into particle board itself. One truckload of sawdust can be made into 20 sheets of particle board selling for $8 per sheet. Further processing costs are $7 per board.
Assume that the cost of logs falls by half. Should Bonner sell the sawdust at split off or process it further?
| a. Sell at split off, the reduction in the cost of the logs is irrelevant |
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| b. Process further because the further processing costs are irrelevant. |
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| c. Process further, the reduction in the cost of the logs will lower further processing costs. |
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| d. Process further, the reduction in the cost of logs makes that option more profitable than it was before |
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| e. Sell at split off because the decrease in the cost of the logs makes that option more profitable than it was before. |
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