Reference no: EM133134209

Question - Washington Hardwoods produces multiple products from a shared production process, including wood shavings and wood veneer. Up to the split-off point for these 2 products, the joint costs associated with their shared processes total $16 million per year. Wood shavings can be sold for $9 million in annual revenue, and wood veneer can be sold for $30 million in annual revenue. Wood shavings can be processed further into pellets at a cost of $10 million, which can then be sold for $25 million. Wood veneer can be processed further into paneling at a cost of $11 million, which can then be sold for $39 million.

1. Find the amount by which operating income will increase if wood shavings are processed further into wood pellets.

2. Find the amount by which operating income will decrease if wood veneer is processed further into paneling?