NuSkin Inc. has two separate profit centres: Chemicals and Cosmetics. The firm acquires its major ingredient for both divisions jointly. Currently, this material is purchased in 1,000-kg for $2,000. The material is passed through an exclusive separator process. After separation, Chemicals receives 300 Litre of chemical J-52A, and Cosmetics receives 200 kg of K-89C. The Chemicals division must process chemical J-52A further before it can be sold. Additional processing costs $150 per litre, and the chemical is then sold for $5/L. The Cosmetics division bottles and packages K-89C as an antiperspirant at a cost of $250 per lot. The antiperspirant is sold for $7/kg. NuSkin has the opportunity to buy higher-quality lots of raw materials for $3,000. Some questions have been raised about the health effects of certain ingredients in antiperspirants, and the higher-quality raw material does not contain any of these ingredients. If NuSkin buys the new material, Chemical's processing costs will increase to $400 per litre, but the selling price of its product will remain the same. Cosmetics' selling price will increase to $15/kg, and its separable costs will remain the same. The CEO would like you to prepare a qualitative and quantitative analysis of whether to purchase a higher quality litre of raw materials for $3,000. Your analysis and recommendation should include the following: A. Assume NuSkin did not purchase the higher-quality lots of raw materials for $3,000, determine the income per litre that each division would report if joint costs were allocated on a net realizable value basis. B. Assume that NuSkin does purchase the higher-quality litre of raw materials for $3,000: 1. If you were the manager of Chemicals, would you want the firm to buy the higher-quality material? Show your calculations, and explain your position. 2. If you were the manager of Cosmetics, would you want the firm to buy the higher-quality material? Show your calculations, and explain your position. 3. Describe the pros and cons to the company as a whole from purchasing the higher-quality material. C. Explain why top management faces uncertainties about how to handle situations such as the purchase higher-quality lots of raw materials for $3,000. D. What methods/incentives can be used to encourage managers who have conflicting interests to take actions that are in the best interests of the company as a whole? E. Recommendation for avoiding potential conflicts for similar types of future decisions in a way that is fair to both managers.