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Forums › ACCA Forums › ACCA PM Performance Management Forums › Hi, could you please explain me this question!! Thank you
A company buys and processes a chemical at a cost of $30000 to produce 1000kg of X and 1000 kg of Z. X can be sold at $24 per kg or be treated at a cost of $2000 to make 500kg of A and 500kg of B. Untreated A can be sold at $35 per kg and untreated B at $30/kg. If treated, which costs $5600 for A and $200 for B, improved A sells for $36/kg and improved B for $30.5/kg. The Z can be sold at $20kg or be turned into Z* at a cost of $100 and sold at $22/kg.
Joint costs are allocated by relative final sales value. The co’ accountant has advised against further processing of A. What could the costs of processing A have to fall for it to become worthwhile?