value: 10.00 points (Prepared from a situation suggested by Professor John W. Ha

Question

value: 10.00 points (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: 2.40 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 1.65 separate product 0.75 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 $4.00 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 Total revenue from further 0.00 rocessin Less sales revenue from one T- bone steak Incremental revenue from further 0.00 rocessin Less cost of further processing 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further? T-bone steaks should be sold as initially cut. T-bone steaks should be processed further

Explanation / Answer

1. Profit per pound from furthur processing T-bone steak

2. We would like to suggest to do furthur process on T - bone as it will generate incremental revenue of $5

Particular Per 16 Ounce T- Bone Sales from Furthur Processing Sales Price of one filet mignon 4 Sales Price of one New York Cut 3.6 Total Revenue from Furthur Processing 7.6 Less Sale Revenue from One T- bone steak 2.4 Incremetal Revenue from furthur processing 5.2 Less cost for furthur processing 0.2 Net Profit from furthur processing 5

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