Question
XYZ Pork processes slaughtered pigs. All meats are processed to the point where they can be sold as sides of beef to grocery stores, butcher
XYZ Pork processes slaughtered pigs. All meats are processed to the point where they can be sold as sides of beef to grocery stores, butcher shops and restaurants. The cost to process each pig is $700. The meat can be sold for $600 and the skin can be sold for $300 each. Joint costs are allocated to the products based on total sales value at the split-off point. 100,000 pigs are processed each year. The meats may be processed further by cutting them into consumer-ready products such as steaks and chops. Further processing is very labor intensive, incurring an addition $500 per pig meat. The finished products from each meat can be sold for $1,300. The skin can be cleaned before being sold. Cleaning adds $75 of additional cost. Cleaned skin can be sold for $350. To optimize the profit of the company, the amount of additional processing cost that should be incurred each year is:
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