$($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 is deciding whether to sell the T$-$bone steaks as they

are initially cut or process them further into filet mignon and the New York cut.

If the T$-$bone steaks are sold as initially cut, the company figures a $1-$pound T$-$bone steak yields the following profit:Less joint costs incurred up to the split$-$off point where T$-$bone$ $8\mathrm{.}90$

Profit per pound

If the company further processes the T$-$bone steaks, then one $16-$ounce T$-$bone steak will yield one $6-$ounce filet mignon, one $8-$ounce

New York cut, and two ounces of waste. It costs $$0\mathrm{.}20$ to further process one T$-$bone steak into the filet mignon and New York cuts.

The filet mignon can be sold for $$14\mathrm{.}00$ per pound, and the New York cut can be sold for $$9\mathrm{.}70$ per pound.

Required:

What is the financial advantage $($disadvantage$)$ of further processing one T$-$bone steak into filet mignon and New York cut steaks?

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