(Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat
ID: 2589006 • 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: Selling price ($2.40 per pound) Less joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product $2.40 1.30 $1.10 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 $0.15 per pound. The filet mignon can be sold for $4.40 per pound, and the New York cut can be sold for $3.80 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 reve Less cost of further processing Profit(loss) per pound from furt 0.00 nue from further processing 0.00 her processing $ 0.00Explanation / Answer
Profit per pound from processing the T-bones steaks into filet mignon and New york cut steaks is as determined below:
Differential Analysis Report-Process or Sell Proposal to process filet mignon and new York cut Particulars Amount ($) Per 16 ounce T bone Sales from further processing: Sale price of one filet mignon (4.4/16*6) 1.65 Sale price of one New york cut (3.8/16*8) 1.90 Total revenue from further processing 3.55 Less: sales Revenue from one T-bone steak 2.40 Incremental Revenue from further processing 1.15 Less: Cost of further processing 0.15 Profit (loss) per pound from further processing 1.00Related Questions
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