Flour Company has decided that their bread flour may sell better if it was marketed for gourmet baking and sold with infused spices. This would involve additional cost for the spices of $0.80 per cup. Each cup could be sold for $5.50.
Required:
1. If SW uses the sales value at splitoff method, what combination of products should SW sell to maximize profits?
2. If SW uses the physical-measure method, what combination of products should SW sell to maximize profits?
3. Explain the effect that the different cost-allocation methods have on the decision to sell the products at splitoff or to process them further.