1. ***** ******** grows medical cannabis for use in oral capsules in southeast California. ***** is trying to determine whether it is worth it to process the oral capsules in-house, or to sell the cannabis to another firm. There are three types of cannabis being produced: Schwag, Mid-Grade and Dank. Joint costs, which are allocated on the basis of sales revenue, are $400,000 for the whole operation, and the cost to process any individual type of capsule is $100,000. Sales prices for each type are given below:

	Plant revenue	Capsule revenue
Shwag	$ 75,000	$150,000
Mid-Grade	$ 200,000	$ 325,000
Dank	$ 450,000	$ 650,000

Explain to ***** which grades ought to be sold at the split off point (plant), and which ought to be processed further (capsule).