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3 Relevant costs for decision making Cipla Uganda pharmaceutical company, buys a chemical for $10,000, which it breaks down into two components: Component A B
3 Relevant costs for decision making Cipla Uganda pharmaceutical company, buys a chemical for $10,000, which it breaks down into two components: Component A B Sales value ($) 8,000 4,000 Allocated costs ($) 7,000 5,000 Component A can be converted into Product A if $6,000 is spent on further processing. Product A would sell for $12,000. Component B can be converted into Product B if $10,000 is spent on further processing. Product B would sell for $17,000. Required; 2) What processing decision should Cipla make in order to maximize profits? Show all the working (13 marks) b) Illustrate the production plan to show the contribution margin. (08 marks) c) Is the project viable or not? Suggest reasons. (04 marks) Total; 25 marks
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