of the seats on Blue- ndustry average of 60%. The tour directorhas ( upancy coul

Question

of the seats on Blue- ndustry average of 60%. The tour directorhas ( upancy could be improved considerably by elimi- that doing so would reduce profits. Explain how this could elage seat occ happen. 2 75) PROBLEM 12-19 sell or Process Further LOTI (Prepared from a situation suggested by Professor John W. HardybieneMeat Proce sin poration is a major processor of beef and other meat products. The company has a large -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. 9 nt of Management believes that a 1-pound T-bone steak would yield the following Wholesale selling price ($2.25 per pound).....$225 Les oint costs incurred up to the split-off point where T-bone steak can be identified as a separate product.. e $0.55 As mentioned above, instead of being sold as is, the T-bone steaks could be further pr 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 ocessed . are waste. The cost of processing the T-bone steaks into these cuts is $0.20 per pound. The filet mignon can be sold for $3.60 per pound, and the New York cut can be sold wholesale for $290 per pound. Required: 1. Determine the profit per pound from processing the T-bone steaks further into filet mignon

Explanation / Answer

Per 16 Ounce T Bone Revenues from further processing: Selling Price of 1 Mignon (6 Ounces X $3.60 per pound / 16 ounces per pound)                      1.35 Selling Price of 1 New York Cut (8 Ounces X $2.90 per pound / 16 ounces per pound)                      1.45 Total revenue from further processing                      2.80 Less: Revenue from 1 T-Bone                    (2.25) Incremental Revenue from further processing                      0.55 Less: Cost of further processing                    (0.20) Profit per pound from further processing                      0.35

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