Montreal has decided that buttermilk might 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. (1 quart = 2 pints.)

Required

1. If Montreal uses the sales value at splitoff method, what combination of products should Montreal sell to maximize profits?

2. If Montreal uses the physical measure method, what combination of products should Montreal 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.