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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 initially cut or to process them further into filet mignon and the New York cut.
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| 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 ($2.10 per pound) |
$2.10 |
Less joint costs incurred up to the split-off point where
T-bone steak can be identified as a separate product |
1.40 |
| Profit per pound |
$0.70
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As mentioned above, instead of being sold as initially cut, 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 8-ounce New York cut; the remaining ounces are waste. The cost of processing the T-bone steaks into these cuts is $0.12 per pound. The filet mignon can be sold for $4.00 per pound, and the New York cut can be sold for $3.10 per pound.
| Requirement 1: |
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Determine the profit per pound from processing the T-bone steaks into filet mignon and New York cut steaks. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
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