Q.3 3 14 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 (S) 8.000 4,000 Allocated costs (S) 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: a) 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 Q.4 Application of Activity-Based Costing Nina Audrey started Nina Interiors, a niche furniture brand, 10 years ago. She ran the business as a sole proprietorship. While she has 50 skilled carpenters and 5 sales people on her payroll, she has been taking care of the accounting by herself. Now, she intends to offer 40% of the ownership to public in next couple years and is willing to make changes and has hired Tracy as a management accountant to organize and improve the accounting systems. Rate