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creativ13 [48]
3 years ago
13

Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $9.90; direct

labor, $13.90, variable overhead $2.90 and fixed overhead, $7.90. An outside supplier has offered to sell the product to Paxton for $34.60. Compute the net incremental cost or savings of buying the component.
a.$2.90 cost per unit.
b. $7.90 savings per unit.
c. $0 cost or savings per unit.
d. $7.90 cost per unit.
e. $2.90 savings per unit.
Business
1 answer:
matrenka [14]3 years ago
7 0

Answer:

D) $7.90 cost per unit

Explanation:

This can be calculated by identifying the relevant costs that will be affected by the transaction. $7.9 is a fixed overhead and will be paid regardless of producing the component in house or purchasing from an external source thus this needs to be omitted from the calculation. So the new cost of producing in house is,

Relevant Cost = 9.9 + 13.90 + 2.9 = $26.7

Thus the incremental cost of this transaction would be

Incremental Cost = 34.60 - 26.7 = $7.90

It is not advisable to purchase this as if they do they will have to pay $34.60 for purchase and would also have to absorb $7.90 of fixed overheads bringing the total cost incurred to 34.60 + 7.90 =$42.5

Hope that helps.

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What is the argument commonly used by supporters of a state income tax? A. It will probably be quite regressive. B. It is a fair
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Answer:

D. It is a fair and more reliable source of revenue.

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Discuss three potential problems a company can face if it decides to expand internationally. Explain why it is important to cons
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Answer:

Three potential issues an organization can confront on the off chance that it chooses to extend universally -  

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Answer:

Please see explanation

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the highest activity level

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