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Question - Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $9.70; direct labor, $13.70, variable overhead $2.70 and fixed overhead, $7.70. An outside supplier has offered to sell the product to Paxton for $33.80. Compute the net incremental cost or savings of buying the component.
a. $2.70 cost per unit.
b. $7.70 savings per unit.
c. $0 cost or savings per unit.
d. $7.70 cost per unit.
e. $2.70 savings per unit.
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