Axle Company Can Produce a Product That Incurs the Following

question 18

Multiple Choice

Axle Company can produce a product that incurs the following costs per unit: direct materials, $10; direct labor, $24, and overhead, $16. An outside supplier has offered to sell the product to Axle for $45. If Axle buys from the supplier, it will still incur 45% of its overhead cost. Compute the net incremental cost or savings of buying.

• A) $4.00 savings per unit.
• B) $4.00 cost per unit.
• C) $2.20 cost per unit.
• D) $3.80 cost per unit.
• E) $2.20 savings per unit.

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Definitions:

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