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katen-ka-za [31]
3 years ago
12

Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10; direct la

bor, $14, variable overhead $3 and fixed overhead, $8. An outside supplier has offered to sell the product to Paxton for $32. Compute the net incremental cost or savings of buying the component.
Business
1 answer:
Usimov [2.4K]3 years ago
6 0

Answer:

$5 per unit

Explanation:

In this question, we compare the total cost and outside supplier cost which are shown below:

Total cost = Direct material per unit + direct labor per unit + variable overhead per unit

= $10 + $14 + $3

= $27

And, the outside supplier cost is $32

So, the incremental cost would be

= $32 - $27

= $5 per unit

The fixed cost would remain unchanged. So, we do not consider it.

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To add, the corporate expense that alters with the company’s production output is called the variable cost.

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Answer:

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Explanation:

Giving the following information:

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