Question

EA9. LO 10.5Underground Food Store has 4,000 pounds of raw beef nearing its expiration date. Each pound has a cost of $4.50. The beef could be sold “as is” for $3.00 per pound to the dog food processing plant, or roasted and sold in the deli. The cost of roasting the beef will be $2.80 per pound, and each pound could be sold for $6.50. What should be done with the beef, and why?

Answer 1

Answer:

We have to find out whether the beef should be sold before roasting to the dog food processing plant or after roasting to the deli.

Given,

Cost per pound of beef = $4.50

I)

Sales price if it is sold to dog food processing plant before roasting = $3.00

Loss if beef is sold to dog food processing plant = Cost - Sales Price

= $4.50 - $3.00

= $1.50

II)

Cost of roasting the beef = $2.80

:. Total cost of production = $2.80 + $4.50

= $7.30

Sales Price per pound if it can be sold to the deli = $6.50

Loss = $7.30 - $6.50

= 0.80

Therefore, the loss can be reduced with the second option.

Therefore, the answer to what should be done is as follows:

The beef should be further procecced since the selling price is increased by $3.50 and cost is increased only by $2.80