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Managerial Accounting

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Relevant cost and revenues sell or process further

MGRACT-KUH1BZ

Harley Company produces furniture from a joint process. Joint costs are \$10,000 for processing 1,000 square feet of lumber. If Harley sells the lumber at split-off they receive revenue of \$15 a square foot. If they process the 1,000 square feet of lumber further into furniture, additional processing costs are \$5 a square foot and the final selling price is \$25 a square foot.

What is the relevant increase or decrease in net operating income from processing the wood into furniture?

A

\$5,000.

B

\$10,000.

C

\$20,000.

D

\$25,000.