Davis Company currently buys a component part for $$6\mathrm{.}50$ per unit. Davis estimates that making the part would require $$5\mathrm{.}00$ per unit of direct materials and $$250$ per unit of direct labor. Davis normally applies overhead using a predetermined overhead rate of $125\%$ of direct labor cost. Davis estimates incremental overhead of $$2\mathrm{.}00$ per unit to make the part. The net incremental cost or savings of making the component is:

Multiple Choice

$$ $$400$ cost per unit

$$125$ cost per unit.

$$3\mathrm{.}00$ cost per unit.

$$3\mathrm{.}00$ savings per unit

$$4\mathrm{.}00$ savings per unit.