Check my work (Prepared from a situation suggested by Professor John W. Hardy.)
ID: 2536462 • Letter: C
Question
Check my work (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. 50 points 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 $2.20 1.60 $0.60 Selling price ($2.20 per pound) Less joint costs incurred up to the split-off point where eBook Print References T-bone steak can be identified as a separate product Profit per pound f the company were to further process the T-bone steaks, then 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. It costs $0.15 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $4.40 per pound, and the New York cut can be sold for $3.30 per pound Required 1. What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further? Complete this question by entering your answers in the tabs belowExplanation / Answer
Per 16-Ounce T-Bone Sales from further processing: Sales price of one filet mignon 1.65 =4.4/16*6 Sales price of one New York cut 1.65 =3.3/16*8 Total revenue from further processing 3.3 Less sales revenue from one T-bone steak 2.2 Incremental revenue from further processing 1.1 Less cost of further processing 0.15 Profit per pound from further processing 0.95 2 The T-bone steaks should be processed further