Beef Products, Inc., processes cattle. It can sell the meat as sides of beef or process it further into final cuts (steaks, roasts, and hamburger). As part of the company’s strategic plan, management is looking for new markets for meat or meat by-products. The production process currently separates hides and bones for sale to other manufacturers. However, management is considering whether it would be profitable to process the hides into leather and the bones into fertilizer. The costs of the cattle and of transporting, hanging, storing, and cutting sides of beef are $100,000.

The company’s accountant provided these data:

Should the products be processed further? Explain youranswer.

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Sales Sold at Split-Off Revenue lf Product Meat Bones Hides Sales Revenue if Sold After Further Processing $200,000 40,000 60,000 Additional Processing Costs $80,000 25,000 $100,000 20,000 50,000 5,000