Cardbury Ltd produces whole milk, semi skimmed milk and Cheese. In order to produce the three products, the company incurs 200,000. The following are output for the three products and sales price:

Product	Output	Sales value at the end of first process
Whole Milk	6,000 litres	20 per litre
Semi skimmed milk	10,000 litres	8 per litre
Cheese	20,000 tonnes	10 per ton

Cardbury Ltd has the possibility to further process these products in order to increase their final sales value. The following additional cost and final sales value after the processing is as follows:

Improved product	Additional processing cost	Sales value after further processing
Whole milk	14 per litre	20 per litre
Semi Skimmed milk	2 per litre	8 per litre
Cheese	6 per ton	16 per ton

Required:

1. Using Sales Value Method, allocate the joint cost to the three products and calculate the cost per unit for each product. (10 marks)
2. If Cardbury Ltd wishes to further process these three products after the split off point, calculate which of the products should be further processed and explain your answer. Your answer should indicate which product will be most profitable.

(10 marks)

Total [20 marks]