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What will be the effect on the contribution margin

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Reference no: EM132117327

Question - The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period: Lumber Division:Capacity200,000 board feet Price per board foot$2.50Variable production cost per bd. ft.$1.25Variable selling cost per bd. ft.$0.50Construction Division: Board feet needed60,000Outside price paid per bd. ft.$2.00If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs. If the Lumber Division has sufficient excess capacity to fulfill the Construction Division's needs, what will be the effect on the company's overall contribution margin?

a. Decrease by $30,000

b. Decrease by $24,000

c. Increase by $36,000

d. Increase by $33,500

Reference no: EM132117327

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