Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 56,000 units of RX5 follows.
Direct materials$5.00 Direct labor 9.00 Overhead 10.00 Total costs per unit 24.00
Direct materials and direct labor are 100% variable. Overhead is 70% fixed. An outside supplier has offered to supply the 56,000 units of RX5 for $19.00 per unit.
1. Calculate the incremental costs of making and buying component RX5.