Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10.70; direct labor, $14.70, variable overhead, $3.70, and fixed overhead, $8.70. An outside supplier has offered to sell the product to Paxton for $37.80. Compute the net incremental cost or savings of buying the component. a. $3.70 cost per unit. b. $8.70 savings per unit. c. $0 cost or savings per unit. d. $8.70 cost per unit. e. $3.70 savings per unit.

Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10.70; direct labor, $14.70, variable overhead, $3.70, and fixed overhead, $8.70. An outside supplier has offered to sell the product to Paxton for $37.80. Compute the net incremental cost or savings of buying the component. a. $3.70 cost per unit. b. $8.70 savings per unit. c. $0 cost or savings per unit. d. $8.70 cost per unit. e. $3.70 savings per unit.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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