10.00 points (Prepared from a situation suggested by Professor John W Hardy) Lon

Question

10.00 points (Prepared from a situation suggested by Professor John W Hardy) Lone Star Meat Packers is a major 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 selli the T-bone steaks 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 company figures that a 1-pound T-bone steak would yield the following profit Selling price ($2.25 per pound) ess joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product $2.25 1.80 $0.45 Profit per pound 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 $0.25 per pound. The filet mignon can be sold for $4.00 per pound, and the New York cut can be sold for $2.80 per pound Required: 1. Determine the profit per pound from processing the T-bone steaks into filet mignon and New York cut O Type here o searca

Explanation / Answer

a Per 16-Ounce T-Bone Sales from further processing: Sales price of one filet mignon 1.5 =4/16*6 Sales price of one New York cut 1.4 =2.8/16*8 Total revenue from further processing 2.9 Less sales revenue from one T-bone steak 2.25 Incremental revenue from further processing 0.65 Less cost of further processing 0.25 Profit per pound from further processing 0.4 b The T-bone steaks should be processed further

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