Question

MC Qu. 75 Wheeler Company can produce a product that... Wheeler Company can produce a product that incurs the following costs per unit: direct materials, $9.40; direct labor, $23.40, and overhead, $15.40. An outside supplier has offered to sell the product to Wheeler for $42.87. If Wheeler buys from the supplier, it will still incur 45% of its overhead cost. Compute the net incremental cost or savings of buying.

Answer 1

$1.6

Step-by-step explanation:

Incremental cost or saving is the additional cost or extra savings made from acquiring an extra unit of product or using another medium to acquire a product.

Cost of production

Direct Materials - 9.40

Direct labor - 23.40

Overhead - 15.40

Total cost of production - 48.20

Cost of purchase

Cost - 42.87

Overhead - (15.4*45%) - 6.93

Total Cost of purchase =49.8

Incremental cost of buying - $1.6