A company, Mediter Oils, processes olives to produce extra virgin olive

oil as its main product. During the production process, it also produces

two by$-$products: olive pomace oil and olive pit biomass fuel.

Given:

The company processes $10,000kg$ of olives.

Total joint costs $($before split$-$off point$)$: R$50,000$

Further processing costs after split$-$off point:

Extra virgin olive oil: R$10,000$

Olive pomace oil: R$2,000$

Olive pit biomass: $R1,000$

Production and Sales:

Extra virgin olive oil: $2,000$ litres, sold at R$20$ per liter

Olive pomace oil: $500$ liters, sold at R$8$ per liter

Olive pit biomass: $3,000kg,$ sold at R$0\mathrm{.}50$ per kg

Required: Calculate the profit for each product using the net realizable

value $($NRV$)$ method to allocate joint costs. Suggest whether the

company should reconsider its pricing strategy. $(15$ Marks$)$