Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat
ID: 2353684 • Letter: P
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.
$1.05
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 $0.19 per pound. The filet mignon can be sold for $4.40 per pound, and the New York cut can be sold for $3.30 per pound.
Determine the profit per pound from processing the T-bone steaks into filet mignon and New York cut steaks.(Round your answer to 2 decimal places. Omit the "$" sign in your response.)
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:Explanation / Answer
Recall 1 Pound = 16 Oz, Filet sale price $4.40/Lb & NY Cut is $3.30 /Lb SO 1 Lb T-Bone @$0.19 = 6 Oz Filet + 8 Oz NY Cut So 1Lb T-Bone will yield = (6/16)Lb Filet + (8/16)Lb NY CUt = (6/16)*$4.40 + (8/16)*$3.30 = $3.30 of Sales Rev Cost incurred is $1.35 at Splitoff + $0.19 in further processing = $1.54 SO Profit per Lb of T-Bone = $3.30 - $1.54 = $1.76