1. Scotty Limited have made two special skin oils for many years from the same process. These are called Nova Oil and Neptune Oil. The Joint processing costs of 150,000 incurred up-to the split-off point.

At the split-off point, they get

10,0000 Litres of Nova Oil 50,000 Litres of Neptune Oil

Selling prices at split-off point

Nova Oil 1.25 per litre

Neptune Oil 2.00 per litre

Nova Oil can be processed further to produce: 60,000 Litres of SuperNova Oil

SuperNova will cost extra fixed cost of: 20,000

Also, an extra variable cost of: 0.45 Per litre of input

The sales price of SuperNova is: 3 Per litre

Which production option will maximise the profitability of Scotty Limited?

Choose one from the following:

A. Nova and Neptune Oils

B. Nova and SuperNova Oils

C. Neptune and SuperNova Oils

D. Only SuperNova Oil