Creamy Delights Ltd. is engaged in the production of Flavored Milk, Cheese, and Clarified Cheese Oil. It purchases processed milk cream and subjects…

Creamy Delights Ltd. is engaged in the production of Flavored Milk, Cheese, and Clarified Cheese Oil. It purchases processed milk cream and subjects it to a churning process until it separates into flavored milk and cheese. For the month of January 2025, the company purchased 50 kilolitres of processed cream @100 per 1,000 ml. Conversion costs of 1,00,000 were incurred up to the split-off point, where two saleable products were obtained — flavored milk and cheese. Cheese can be further processed into clarified cheese oil. Production and Sales Information for January 2025 Product Production (KL / tonne) Sales Quantity (KL / tonne) Selling Price per Litre / Kg (₹) Flavored Milk 28 28 30 Cheese 20 — — Clarified Cheese Oil 16 16 480 All 20 tonnes of cheese were further processed at an incremental cost of 1,20,000 to yield 16 kilolitres of clarified cheese oil. There was no opening or closing inventory of flavored milk, cheese, or clarified cheese oil during January 2025. Required: (i) SHOW how the joint cost would be apportioned between Flavored Milk and Cheese under the Estimated Net Realisable Value (NRV) method. (ii) In February, “Dairy Fresh Foods” offers to purchase 20 tonnes of cheese at 360 per kg. If Creamy Delights Ltd. accepts this offer, no clarified cheese oil would be produced in February. SUGGEST whether Creamy Delights Ltd. should accept the offer or continue further processing the cheese into clarified cheese oil, considering its effect on operating income.