Reference no: EM13611474

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

b. Process further because the further processing costs are irrelevant.

c. Process further, the reduction in the cost of the logs will lower further processing costs.

d. Process further, the reduction in the cost of logs makes that option more profitable than it was before

e. Sell at split-off because the decrease in the cost of the logs makes that option more profitable than it was before.