Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10.90; direct labor, $14.90, variable overhead $3.90 and fixed overhead, $8.90. An outside supplier has offered to sell the product to Paxton for $38.60. Compute the net incremental cost or savings of buying the component.

Multiple Choice

• $3.90 cost per unit.

• $8.90 cost per unit.

• $3.90 savings per unit.

• $0 cost or savings per unit.

• $8.90 savings per unit.