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Problem 11-20 Sell or Process Further Decision (LO11-7) (Prepared from a situation suggested by Professor John W. Hardy.) 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. 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 ($2.20 per pound) Less joint costs incurred up to the split-off point wh T-bone steak can be identified as a separate Profit per pound If the company were to further process the T-bone steaks, then 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-boge steak cut in this way will yield one 6 ounce filet mignon and one 8-ounce New York cut: the remaining ounces are waste. It costs $0.18 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $3.60 per pound and the New York cut can be sold for $3.16 per pound Required: 1. What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further? Activate If the company were to further process the T-bone steaks, then 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. It costs $0.18 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $3.60 per pound, and the New York cut can be sold for $3.10 per pound. Required: 1. What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage of further processing one T-bone steak into filet mignon and New York cut steaks? (Do not round intermediate calculations. Round your answer to 2 decimal places.) per unit Next Problem 11-22 Special Order Decisions (LO11-4) Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 42,000 Rets per year. Costs associated with this level of production and sales are given below Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense Total cost 540,000 420.000 126.000 194.000 165.000 252.000 $ 2,100,000 The Rets normally sell for $55 each Fixed manufacturing overhead is $294,000 per year within the range of 36,000 through 42,000 Rets per year Required: 1. Assume that due to a recession, Polaski Company expects to sell only 36.000 Rets through reguldt channels next year. A large retail chain has offered to purchase 6.000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain's name on the 6.000 units. This machine would cost $12,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage disadvantage of Go to per

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