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Question 5 (12 points) Heptagon Pty Ltd produces two products (smoothie and milkshake) from a joint process. A total of 2,000 units of the smoothie
Question 5 (12 points) Heptagon Pty Ltd produces two products (smoothie and milkshake) from a joint process. A total of 2,000 units of the smoothie can be sold at split-off for $5 per unit and a total of 1,000 units of the milkshake can be sold at split-off for $4 per unit. The joint cost of production is $50,000 which is allocated to the two products according to the number of units produced. The smoothy can be processed further as smoothie plus at an additional cost of $10,000 and sold for $7.50 per unit, and the milkshake can be processed further as super milkshake at an additional cost of $5,000 and sold for $10 per unit. Required (a) What is the difference in profit/loss if the company decides to process further theRequired (a) What is the difference in profit/loss if the company decides to process further the smoothie, instead of selling it at split-off? And what is the difference in profit/loss if the company decides to process further the milkshake, instead of selling it at split- off? Should Heptagon Pty Ltd process further these products? Clearly show your workings to support your argument. (6 marks) (b) What are the minimum prices Heptagon Pty Ltd should charge for a smoothie plus and a super milkshake for they being worth processing further from a smoothie and a milkshake? (6 marks) (6+6 = 12 marks)
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