SunnyDay plc manufactures two products, A and B, from a joint process. Information about the two joint products is as follows:

Product A Product B

Anticipated Production (in tons) 40,000 50,000

Selling price per ton as split-off 50 60

Additional processing costs per ton after split-off 25 95

Selling price per ton after further processing 100 140

The total cost of the joint process is 1,500,000.

Requirement

a) Should the joint products be processed further or sold at the split-off point? Briefly discuss your answer. 10 Marks

b) Assume that SunnyDay plc sells both products at the split-off point. What is SunnyDay plcs income? 5 Marks

c) SunnyDay plc has recently approved a new strategic plan where it is clearly stated that the companys aim should be to maximise its profit. How does this decision affect the production and processing of product A and product B? What would SunnyDay plcs income be in this scenario? 5 Marks

d) Following the decision taken in part (a), what would be the share of joint cost allocated to A and B respectively, if costs were split using a physical method? 5 Marks

e) Following the decision made in part (a), what would be the share of joint cost allocated to A and B respectively, if costs were split using the net-realisable-value method?

10 Marks

f) Which method, between part (d) and (e), is preferable and why? 5 Marks