Elsie has decided that buttermilk may sell better if it were marketed for baking and sold in pints. This would involve additional packaging at an incremental cost of $0.25 per pint. Each pint could be sold for $0.90.
REQUIRED
1. If Elsie uses the sales value at splitoff method, what combination of products should Elsie sell to maximize profits?
2. If Elsie uses the physical measure method, what combination of products should Elsie sell to maximize profits?
3. Explain the effect that the different cost allocation methods have on the decision to sell the products at splitoff or to process them further.