Reference no: EM13588067

(Prepared from a situation suggested by Professor John W. Hardy.) Abilene 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 ($2.20 per pound)	$	2.20
Less joint costs incurred up to the split-off point where   T-bone steak can be identified as a separate product		1.35
Profit per pound	$	0.85

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. A one pound (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 $0.17 per pound. The filet mignon can be sold for $4.00 per pound, and the New York cut can be sold wholesale for $3.90 per pound.

What is the less revunue from one t-bone steak?

total Revunue is 3.45

Less rev. from t-bone steak =?

Incremental revunue from further processing=?