(Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat
ID: 2592384 • 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. yield the following profit: $ 2.20 1.65 $ 0.55 Selling price ($2.20 per pound) Less joint costs incurred up to the split-off point where T-bone steak can be identified as a separate produdt 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 processing the T-bone steaks into these cuts is $0.12 per pound. The filet mignon can be sold for $4.00 per pound, and the New York cut can be sold for $3.90 per pound.Explanation / Answer
Per 16 ounce of T-BOne Sales from further processing Sales price of one filet mignon 4 Sales price of one new york cut 3.9 Total revenue from further processing 7.9 Less Sales revenue of one T bone steak 2.2 Incremental revenue from further processing 5.7 Less Cost of further processing 0.12 Profit(losss) per pound from further processing 5.58 Yes it should be further processed
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.