Problem $11-20($Algo$)$ Sell or Process Further Decision $[$LO$11-7]$

$16\mathrm{.}66$ points

$($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 it is trying to decide whether to sell the T$-$bone steaks as they are Initlally cut or to process them further into filet mignon and the New York cut.

If the T$-$bone steaks are sold as initially cut, the company figures that a $1-$pound T$-$bone steak would yield the following profit:

Selling price $($ $$2\mathrm{.}20$ per pound$)$

Less joint costs incurred up to the split$-$off point where Tbone steak can be identified as a separate product Profit per pound

If the company were to further process the T$-$bone steaks, then 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 $8-$ounce New York cut; the remalning ounces are waste. It costs $$0\mathrm{.}16$ to further process one $T-$bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $$3\mathrm{.}60$ per pound, and the New York cut can be sold for $$3\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 that the T$-$bone steaks be sold as initially cut or processed further?

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? $($Do not round intermedlate calculations. Round your answer to $2$ decimal places.$)$

per unit