you said "2. The correct answer to the above example is that the C1 cost of 80c/lb has to be compared with 91.85c/lb(being the zinc price of 110c/lb less the 'free metal' portion of 16.5% or 18.15c(16.5% of 110c). So the correct margin is 11.85c/lb."
however if the C1 is already taking into account the payability, why would you deduct payability from the zinc price again?
the C1 is determined on a "payable lb" basis, that means the attributable pound being sold gets the full price
price minus C1 cost (on payable lb) requires no further discount to determine operating cashflow (C3 basis is then a follow up calculation obviously)
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