$($

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 is deciding whether to sell the T

$-$

bone steaks as they are initially cut or process them further into filet mignon and the New York cut.

If the T

$-$

bone steaks are sold as initially cut, the company figures a

$1$

$-$

pound T

$-$

bone steak yields the following profit:

Selling price

$($

$

$8\mathrm{.}15$

$$per pound

$)$

$$$

$8\mathrm{.}15$

Less joint costs incurred up to the split

$-$

off point where T

$-$

bone steak can be identified as a separate product

$1\mathrm{.}35$

Profit per pound $

$6\mathrm{.}80$

If the company further processes the T

$-$

bone steaks, then one

$16$

$-$

ounce T

$-$

bone steak will yield one

$6$

$-$

ounce filet mignon, one

$8$

$-$

ounce New York cut, and two ounces of waste. It costs $

$0\mathrm{.}14$

$$to further process one T

$-$

bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $

$14\mathrm{.}00$

$$per pound, and the New York cut can be sold for $

$9\mathrm{.}00$

$$per pound.

Required:

What is the financial advantage

$($

disadvantage

$)$

$$of further processing one T

$-$

bone steak into filet mignon and New York cut steaks?