Question $3$:

$[20]$

Spare Parts Ltd manufacturers components for motor vehicle assemblers. Although new motor vehicle sales are starting to improve, Spare Parts Ltd is still operating for only $3500$ direct labour hours per month, which represents $70$ per cent of normal capacity.

One of Spare Parts Ltd $\text{'}$s valued customers, Titanium Ltd$,$ has approached the marketing director with a proposal to buy a modified version of one of Spare Parts Ltds existing components, XXX$.$ The order is for $1000$ units per month, for three months, at a price of R$204$ per unit. Titanium's regular overseas supplier has been temporarily shut down, following a fire in its factory.

Spare Parts Ltd standard direct manufacturing cost for component XXX$,$ without modification, is as follows:

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