Vancouver Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows:
■ Raw lumber division: $120 per 100 board-feet of raw lumber
■ Finished lumber division: $145 per 100 board-feet of finished lumber
Assume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $170 per 100 board-feet. Finished lumber can be sold at $370 per 100 board-feet.

Required

1. Should Vancouver Lumber process raw lumber into its finished form? Show your calculations.
2. Assume that internal transfers are made at 130% of variable cost. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of Vancouver Lumber as a whole? Explain.
3. Assume that internal transfers are made at market prices. Will each division maximize its division operating- income contribution by adopting the action that is in the best interest of Vancouver Lumber as a whole? Explain.