$($Prepared from a situation suggested by Professor John W$.$ Hardy.$)$ Granite City Meat

Processing Corporation 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 is or to process them further into filet mignon and New York

cut steaks.

Management believes that a $1-$pound T$-$bone steak would yield the following profit:

Wholesale selling price $($ $$1\mathrm{.}90$ per pound$)$

Less joint costs incurred up to the split$-$off point

where

T$-$bone steak can be identified as a separate $,1\mathrm{.}50$

product

Profit per pound

As mentioned above, instead of being sold as is$,$ 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 $5-$ounce filet mignon and one $9-$ounce

New York cut; the remaining ounces are waste. The cost of processing the T$-$bone

steaks into these cuts is $$0\mathrm{.}21$ per pound. The filet mignon can be sold for $$3\mathrm{.}20$ per

pound, and the New York cut can be sold wholesale for $$2\mathrm{.}40$ per pound.

Required:

Determine the profit per pound from processing the T$-$bone steaks further into filet

mignon and New York cut steaks. $($Do not round intermediate calculations. Round

your final answer to $2$ decimal places.$)$

Profit per pound from further

processing

Would you recommend that the T$-$bone steaks be sold as is or processed further?

T$-$bone steaks should be sold.

T$-$bone steaks should be processed further.