CONFIDENTIAL QUESTION 3 (5 marks; 9 minutes) You are required to choose the most appropriate answer: 3.1 Pasha Company produced 50 defective units last month at a unit manufacturing cost of R30. The defective units were discovered before leaving the plant. Pasha can sell them "as is" for R20 or can rework them at a cost of R15 and sell them at the regular price of R50. Which of the following is not relevant to the sell-or-rework decision? a. b. c. d. e. R15 for rework R20 selling price of defective unit R30 manufacturing cost R50 regular selling price All of these are relevant 3.2 Which of the following is not a step in the decision-making model? a. b. C. d. e. Define the problem Identify alternatives Consider qualitative factors Total relevant costs and benefits for each alternative Determine costs and benefits for both feasible and unfeasible alternatives 3.3 A company is considering a special order for 1 000 units to be priced at R8.90 (the normal price would be R11.50). The order would require specialized materials costing R4.00 per unit. Direct labour and variable factory overhead would cost R2.15 per unit. Fixed factory overhead is R1.20 per unit. However, the company has excess capacity and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing R1 300. Which of the following is relevant to the special order? a. b. R11.50 normal selling price R1.20 fixed factory overhead per unit R7.35 spent on donuts and coffee R8.90 selling price per unit of special order None of these d. e. 3.4 Walloon Company produced 150 defective units last month at a unit manufacturing cost of R30. The defective units were discovered before leaving the plant Walloon can sell them as is for R20 or can rework them at a cost of R15 and sell them at the regular price of R50. The total relevant cost of reworking the defective units is d. D C. d. e. R4 500 R6 750 R7 500 R3 000 R2 250 3.5 a. b An important qualitative factor to consider regarding a special is the: Variable costs associated with the special order Avoidable fixed costs associated with the special order Effect the sale of special-order units will have on the sale of regularly priced units d. Incremental revenue from the special order CONFIDENTIAL