Company A produces a component used in the production of one of the company’s main products

Company A produces a component used in the production of one of the company’s main products. The costs are budgeted as follows: Amount per unit (R) Amount per 5 000 units (R) Materials 5 25 000 Labour 15 75 000 Variable overhead 10 50 000 Depreciation 4 20 000 Allocated general overhead 12 60 000 Total cost 46 230 000 The components can be purchased from an outside supplier at a cost of R35 per unit. Required: Q.3.2 State five qualitative aspects that the company must evaluate before making a decision in Q.3.1 above. Q.3.3 Briefly explain the difference between avoidable costs, differential costs and opportunity costs. Provide one example of each cost. Q.3.4 List two examples of scenarios where relevant costing can be used effectively in decision‐making.

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