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Feedback Check My Work Opportunity cost is the benefit given up when one alternative is chosen over another alternative. For instance, if you process a product further you give up the opportunity to sell it at an earlier stage of production APPLY THE CONCEPTS: Calculate differential cost in a sell-or-process-further decision Blanche Corporation buys cedar logs. It removes the bark and cuts each log into cedar planks. It can sell each plank for $35. The cost to produce each plank is $10. BlancheCorporation has the opportunity to use these planks to make cedar canoes. It takes 10 cedar planks to make one cedar canoe and requires an additional $1,050 in production costs. A cedar canoe can be sold for $1,175. The differential cost of making one cedar canoe is $25 1050 1150 25 825 APPLY THE CONCEPTS: Calculate differential income in a sell-or-process-further decision Complete the table to compare the effects of selling at the split-off point or processing further Sell or Process Further Differential Analysis Report Differential revenue from further processing: Revenue from sale of ten planks Revenue from sale of one canoe Differential revenue Differential cost from further processing: Additional cost to process further Differential income (loss) from further processing Based on the analysis, Blanche Corporation should sell the planks . If Blanche processes the planks into canoes, its overall income will decrease by per canoe Feedback Check My Work From the data in the preceding sections, calculate the total sales and costs if you were to sell ten planks with no further processing. Then calculate the total sales and costs if you process the same ten planks into a canoe The difference between the two scenarios could swing either way, depending on the net income differential effect that you calculate

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