(Prepared from meat products. The as they are initially cut or to process them f
ID: 2511898 • Letter: #
Question
(Prepared from meat products. The as they are initially cut or to process them further into filet mignon and the New York cut If the T-bone steaks are sold as initially cut, the com a situation suggested by Professor John W. Hardy) Lone Star Meat Packers is a major processor of beef and other company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks pany figures that a 1-pound T-bone steak would yield the following profit s 2.40 35 s 1.05 Selling price ($2.40 per pound) tess joint costa incurred up to the split-off point where 7-bone steak can be identified as a separate produet Profit per pound bone steaks, then cutting one side of a T-bone steak provides the filet mignon and If the company were to further process the T cutting the other side provides the New York cut. One 1 one 8-ounce New York cut, the waste. It 6-ounce T-bone steak cut in this way will yield one 6-ounce filet mignon and e remaining ounces are waste. It costs $0.12 to further process one T-bone steak into the filet mignon flet mignon can be sold for $4.00 per pound, and the New York cut can be sold for $3.50 per pound.. and New York cuts. The Required: 2. Would you recommend that is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? the T-bone steaks be sold as initially cut or processed further?Explanation / Answer
Req 1: Incremenntal Revenue per pound of T-bone steaks: Revenue after further processing: Filet mignon (6 ounce @( 4.00/16)) 1.5 New York cust (8 ounce @ (3.50/16)) 1.75 Revenue per pound after further processing 3.25 Revenue per pound at splitt of 2.4 Incremental revevnue per pound 0.85 Less: Incremental cost pere pound 0.12 Net Incremental income after further processing 0.73 Req 2: Hence, T-bone steak shall be sold after further processing.
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