109

Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10.30; direct labor, $14.30, variable overhead $3.30 and fixed overhead, $8.30. An outside supplier has offered to sell the product to Paxton for $36.20. Compute the net incremental cost or savings of buying the component.

Multiple Choice

• $3.30 cost per unit.

• $8.30 savings per unit.

• $0 cost or savings per unit.

• $8.30 cost per unit.

• $3.30 savings per unit.