Paxton Company Can Produce a Component of Its Product That

question 85

Multiple Choice

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

• A)$5.00 savings per unit.
• B)$3.00 cost per unit.
• C)$0 cost or savings per unit.
• D)$5.00 cost per unit.
• E)$3.00 savings per unit.

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Definitions:

Noncontrolling Interest

Noncontrolling interest is a financial stake in a subsidiary held by investors other than the parent company, reflecting their share of the subsidiary's net assets and earnings.

Goodwill

The excess value paid for a company over its net asset value, reflecting intangible assets such as brand reputation, customer relationships, and intellectual property.

Acquisition-Date

The specific date on which one entity gains control over another, which is crucial for recognizing and measuring the assets acquired, liabilities assumed, and any noncontrolling interest.

Control Premium

An additional amount that a buyer is willing to pay over the current market price to acquire a controlling interest in a company.