(Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat
ID: 2583850 • Letter: #
Question
(Prepared from a situation suggested by Professor John W. Hardy.) 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.
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:
(Prepared from a situation suggested by Professor John W. Hardy.) 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.
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 ($2.10 per pound) Less joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product $2.10 1.40 $0.70 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 $0.20 per pound. The filet mignon can be sold for $3.60 per pound, and the New York cut can be sold for $3.60 per pound Required: 1. Determine the profit per pound from processing the T-bone steaks into filet mignon and New York cut steaks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Per 16-Ounce T-Bone Sales from further processing Sales price of one filet mignon Sales price of one New York cut Total revenue from further processing Less sales revenue from one T-bone steak Incremental revenue from further processing Less cost of further processing Profit(loss) per pound from further processingExplanation / Answer
1. Determine the profit per pound from processing the T bone steaks into filet mignon and new york cut steaks
2) T bone steaks should be processed further..
Sales from further processing Sale price one filet mignon 3.60 Sale price new york cut steaks 3.60 Total revenue from further processing 7.20 Less: Sale revenue one T bone steaks (2.10) Incremental revenue from further processing 5.10 Less:Cost of further processing (0.20) Profit (loss) per pound from further processing 4.90Related Questions
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