Shosalosa Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows: Direct materials 45 000 Direct labor 65 000 Variable factory overhead 30 000 Fixed factory overhead 70 000 Total costs 210 000 Of the fixed factory overhead costs, R30 000 is avoidable. Phrasa Company has offered to sell 10 000 units of the same part to Shosalosa Company for R18 per unit. Assuming there is no other use for the facilities, Shosalosa should as this would save R per unit.
Shosalosa Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:
Direct materials 45 000
Direct labor 65 000
Variable factory
Fixed factory overhead 70 000
Total costs 210 000
Of the fixed
Phrasa Company has offered to sell 10 000 units of the same part to Shosalosa Company for R18 per unit. Assuming there is no other use for the facilities, Shosalosa should as this would save R per unit.
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