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Ahmad Beef Products, Inc., process cattle. It can sell meat as sides of beef or process it further into final cuts (steaks, roasts, and hamburger).

Ahmad Beef Products, Inc., process cattle. It can sell meat as sides of beef or process it further into final cuts (steaks, roasts, and hamburger). As part of the companys strategic plan, management is looking for new markets for meat or meat by-products. The production process currently separates hides and bones for sale to other manufacturers. However, management is considering whether it would be profitable to process the hides into leather and the bones into fertilizer. The costs of the cattle and of transporting, hanging, storing, and cutting sides of beef are $125,000. The companys accountant provided these data:

Product

Sales Revenue if Sold at

Split-Off

Sales Revenue

if Sold After Further Processing

Additional Processing Costs

Meat

$100,000

$200,000

$80,000

Bones

20,000

40,000

15,000

Hides

50,000

55,000

10,000

Instructions: Should the products be processed further? Explain your answer. (show your calculation) Ahmad Beef Products, Inc., process cattle. It can sell meat as sides of beef or process it further into final cuts (steaks, roasts, and hamburger). As part of the companys strategic plan, management is looking for new markets for meat or meat by-products. The production process currently separates hides and bones for sale to other manufacturers. However, management is considering whether it would be profitable to process the hides into leather and the bones into fertilizer. The costs of the cattle and of transporting, hanging, storing, and cutting sides of beef are $125,000. The companys accountant provided these data:

Product

Sales Revenue if Sold at

Split-Off

Sales Revenue

if Sold After Further Processing

Additional Processing Costs

Meat

$100,000

$200,000

$80,000

Bones

20,000

40,000

15,000

Hides

50,000

55,000

10,000

Instructions: Should the products be processed further? Explain your answer. (show your calculation)

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