Beef Producers Association

managerial accounting (NEED HELP!!!!)?

The San Ynez Cattle Company is a producer of fine beef products. The company has a large amount of T-bone steaks on hand, and is trying to decide wether to sell the T- bone steaks as they are or to process them further into filet mignon and New York cut steaks.

If the T-bone steaks are sold as they are, the company calculates that a one-pound T-bone steak will yield the following profit:

Selling Price: $8.50
Less: joint product cost 5.80
Profit per pound: $2.70

Instead of being sold as T-bone steaks the steaks can be processed further into filet mignon and New York cut steaks. By cutting up a 16-ounce T-bone steak, it will yield one 6-ounce filet mignon and one 8-ounce New York cut steak. The remaining 2-ounces (the bone) are waste. The cost of processing the T-bone steaks into these two cuts is $6.25 per pound. The filet mignon can be sold for $20.00 per pound, and the New York cut can be sold for $16.00 per pound.

Requirements:
1. Determine the incremental profit (or loss) per pound form processing the T-bone steaks into filet mignon and New York cut steaks. (PLEASE SHOW YOUR WORK HERE FOR FULL CREDIT)

2. Would you recommend to the company that they sell the T-bone steaks as is, or process them further into filet mignon and New York cut steaks? Please explain.

Homework helps you learn, but only if you do it yourself.