$($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:

Selling price $($ $$8\mathrm{.}75$ per pound$)$

Less joint costs incurred up to the split$-$off point where T$-$bone steak

can be identified as a separate product

Profit per pound

$$8\mathrm{.}75$

$1\mathrm{.}40$

$$7\mathrm{.}35$

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 $$0\mathrm{.}14$ to further process one T$-$bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $$13\mathrm{.}00$ per pound, and the New York cut can be sold for $$9\mathrm{.}60$ 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?

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

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

Note: Do not round intermediate calculations. Round your answers to $2$ decimal places.

Financial advantage

$

$1\mathrm{.}13$

per unit