1.35 (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 ($2.20 per pound) $ 2.20 Les joint costo incurred up to the split-off point where T-bone steak can be identified as a separate product Profit per pound $ 0.85 If 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 yleld one 6-ounce filet mignon and one 8-ounce New York cut the remaining ounces are waste. It costs $0.12 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $3.60 per pound, and the New York cut can be sold for $3.30 per pound. Required: 1. What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Financial advantage s 54,120.00 per unit Required Required 2 > Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (195 seats 40$ occupancy * $210 ticket price) $ 16,380 100.00 Variable expenses ($18.00 per person) 1,404 8.6 Contribution margin 14,976 91.41 Flight expenses Salaries, flight crew $ 1,800 Flight promotion Depreciation of aircraft 1,550 Fuel for aircraft 5,600 Liability insurance 4,500 Salaries, flight assistants 1,300 Baggage loading and flight preparation 1,950 Overnight costs for flight crew and assistants at destination 700 Total flight expenses 18,180 Net operating loss $ (3,204) 780 The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company, the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482 c. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses. d. If flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another flight e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll Required: 1. What is the financial advantage (disadvantage) of discontinuing flight 482? Answer is complete but not entirely correct. Financial (disadvantage 56,400 2. In Industries that process joint products, the costs of the raw materials inputs and the sales values of intermediate and final products are often volatile. Change the data area of your worksheet to match the following: B $ $ 245,000 40,000 A 1 Chapter 13: Applying Excel 2 3 Data 4 Exhibit 13-7 Santa Maria Wool Cooperative 5 Cost of wool 6 Cost of separation process 7 Sales value of intermediate products at split-off point B Undyed coarse wool 9 Unayed fine wool 10 Undyed superfine wool 11 Costs of further processing (dyeing) intermediate products Undyed coarse wool 12 Undyed fine wool 13 Undyed superfine wool 14 Sales value of end products: 15 Dyed coarse wool 16 Dyed fine wool 17 Dyed superfino wool 18 $ $ $ 140,000 146,000 77.000 ES $ $ $ 50.000 60,000 10,000 $ $ 170,000 228.000 88.000 $ 2. In industries that process joint products, the costs of the raw materials inputs and the sales values of intermediate are often volatile. Change the data area of your worksheet to match the following: A B 1 Chapter 13: Applying Excel 2 2 $ ON 245,000 40,000 $ $ opa $ 3 Data 4 Exhibit 13-7 Santa Maria Wool Cooperative 5 Cost of wool 6 Cost of separation process 7 Sales value of intermediate products at split-off point: 8 Undyed coarse wool Undyed fine wool 10 Undyed superfine wool 11 Costs of further processing (dyeing) intermediate products: Undyed coarse wool 12 13 Undyed fine wool Undyed superfine wool 14 Sales value of end products: 15 Dyed coarse wool 16 Dyed fine wool 17 Dyed superfine wool 18 140,000 146,000 77,000 $ $ 50,000 un Aw $ $ 60,000 10,000 $ $ 170,000 228,000 88,000 If your formulas are correct, you should get the correct answers to the following questions a. What is the overall profit if all intermediate products are processed into final products? Overall profit from processing all intermediate products b. What is the financial advantage (disadvantage) from further processing? from further processing undyed coarse wool from further processing undyed fine wool from further processing undyed superfine wool 0.1. With these new costs and selling prices, what recommendations would you make concerning the company's operations? Sell as in or process further the intermediate product undyed coarse wool? Sell as is or process further the intermediate product undyed pine wool? Sell as is or process further the intermediate product undyed superfine wool? C-1. With these new costs and selling prices, what recommendations would you make concerning the company's operations? Sell as is or process further the intermediate product undyed coarse wool? Sell as is or process further the intermediate product undyed fine wool? Sell as is or process further the intermediate product undyed superfine wool? 2. If your recommendation in part (c-1) is followed, what would be the company's overall profit? Overall profit from following the plan in part ()