(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 ($4.70 per pound)	$	4.70
Less joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product		3.50
Profit per pound	$	1.20

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 10-ounce New York cut; the remaining ounces are waste. The cost of processing the T-bone steaks into these cuts is $0.32 per pound. The filet mignon can be sold for $6.40 per pound, and the New York cut can be sold wholesale for $5.60 per pound.

Required:

1.	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.)

2.

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.