Lone Star Meat Packers is a major processor of beef and other meat products. The

ID: 2505004 • Letter: L

Question

Lone Star Meat Packers is a major processor of beef and other meat products. The company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks as they are initially cut or to process them further into filet mignon and the New York cut.

$0.70

As mentioned above, instead of being sold as initially cut, the T-bone steaks could be further processed into filet mignon and New York cut steaks. Cutting one side of a T-bone steak provides the filet mignon, and cutting the other side provides the New York cut. One 16-ounce T-bone steak cut in this way will yield one 6-ounce filet mignon and one 8-ounce New York cut; the remaining ounces are waste. The cost of processing the T-bone steaks into these cuts is $0.12 per pound. The filet mignon can be sold for $4.00 per pound, and the New York cut can be sold for $3.10 per pound.

Determine the profit per pound from processing the T-bone steaks into filet mignon and New York cut steaks. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Quesrtion 2:

Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below:

1,391,160

316,000

551,000

524,160

345,100

100,400

125,200

119,500

$298,360

$(2,600)

$137,100

$163,860

The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use:

$747,700

$218,200

$288,700

$240,800

If the T-bone steaks are sold as initially cut, the company figures that a 1-pound T-bone steak would yield the following profit:

Explanation / Answer

Recall 1 Pound = 16 Oz, Filet sale price $4.40/Lb & NY Cut is $3.30 /Lb SO 1 Lb T-Bone @$0.19 = 6 Oz Filet + 8 Oz NY Cut So 1Lb T-Bone will yield = (6/16)Lb Filet + (8/16)Lb NY CUt = (6/16)*$4.40 + (8/16)*$3.30 = $3.30 of Sales Rev Cost incurred is $1.35 at Splitoff + $0.19 in further processing = $1.54 SO Profit per Lb of T-Bone = $3.30 - $1.54 = $1.76

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Lone Star Meat Packers is a major processor of beef and other meat products. The

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