Periwinkle produces two products (juice and puree) from a joint process using fruits. The joint cost of production is $50,000. A total of 5,000 units of juice can be sold at split-off for $18 per unit or processed further as juice plus at an additional cost of $23,000 and sold for $23 per unit. A total of 10,000 units of puree can be sold at split-off for $16 per unit or processed further as puree plus at an additional cost of $15,000 and sold for $17 per unit.

Required

1. What is the difference in profit if the company decides to process further the juice, instead of selling it at split-off? (3 marks)

2. What is the difference in profit if the company decides to process further the puree, instead of selling it at split-off? (3 marks)

3. How does a reduction on the joint cost of production from $50,000 to $30,000 influences the decision whether to process further the juice and the puree instead of selling them at split-off? Justify your answer. (4 marks)