Lumber Company Case - Managerial Accounting

Thèmes abordés

Managerial Accounting, Rouen Business School, MGM, Case, Lumber Company Case, Solution

Résumé du document

A lumber company is considering an expansion of its facilities. The company believes it can sell lumber for $0.18/board foot. The tax rate for the company is 30 percent. The company has the following two opportunities:

- Build factory A with annual fixed costs of $20million and variable costs of $0.10/board foot. This factory has an annual capacity of 500 million board feet.
- Build factory B with annual fixed costs of $10million and variable costs of $0.12/board foot. This factory has an annual capacity of 300 million board feet.

Extraits

[...] Build factory B with annual fixed costs of $10million and variable costs of $ 0.12 /board foot. This factory has an annual capacity of 300 million board feet. Required: What is the break-even point in board feet for Factory A If the company wants to generate an after tax profit of million, how many board feet would the company have to process and sell if it built Factory If demand for lumber is uncertain, which factory is riskier? At what level of board feet would the after-tax profit of the two factories be the same? [...]

[...] A lumber company is considering an expansion of its facilities. The company believes it can sell lumber for $ 0.18 /board foot. The tax rate for the company is 30 percent. The company has the following two opportunities: Build factory A with annual fixed costs of $20million and variable costs of $ 0.10 /board foot. This factory has an annual capacity of 500 million board feet. [...]