Donder Milling Company Purchases Logs and Mills Them into Various

Multiple Choice

Donder Milling Company purchases logs and mills them into various grades of lumber. During the sawing and planning process, a considerable amount of sawdust is generated. Currently, Donder sells the sawdust to a particle board manufacturer for $50 per truckload. Donder is considering processing the sawdust into particle board itself. One truckload of sawdust can be made into 20 sheets of particle board selling for $8 per sheet. Further processing costs are $7 per board.
-Refer to the Figure.Assume that the cost of logs falls by half.Should Donder sell the sawdust at split-off or process it further,and what is the effect on income?

A) Process further; the reduction in the cost of logs makes that option more profitable than it was before.
B) Sell at split-off; the decrease in the cost of the logs makes that option more profitable than it was before.
C) Sell at split-off; the reduction in the cost of the logs is irrelevant.
D) Process further; the reduction in the cost of the logs will lower further processing costs.