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.
$2.90 cost per unit.
$7.90 savings per unit.
$0 cost or savings per unit.
$7.90 cost per unit.
$2.90 savings per unit.