Question
(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.
(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 ($2.60 per pound) | $ | 2.60 |
Less joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product | 1.55 | |
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Profit per pound | $ | 1.05 |
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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 6-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 $0.17 per pound. The filet mignon can be sold for $4.40 per pound, and the New York cut can be sold wholesale for $3.20 per pound.
1a. Determine the profit per pound from processing the T-bone steaks further into filet mignon and New York cut steaks. Profit per pound from further processing $ |
I tried and got $0.48 and that is not right |
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