Hearty Dairy is trying to decide whether it should sell the milk that it processes “as is” or further process it into butter. Management has collected the following data pertaining to milk:

Wholesale selling price ($5.30 per 4 litres) ............................................... $5.30
Less: Joint costs incurred up to the split-off point where
milk can be identified as a separate product ............................................  4.40
Profit per 4-litres .......................................................................................... $0.90

A 4-litre container of milk, when further processed, can yield 0.5 kilogram of butter. The cost of further processing is $3 per kilogram of butter. One kilogram of butter can be sold at a price of $15.60.

Required:

1. What data items are relevant when deciding whether to sell milk “as is” or process further into butter? How should the remaining cost items be classified?

2. Should milk be sold “as is” or processed further into butter?