Please Explain. Thank you. Also wether it is a savings or cost.

Davis Company currently buys a component part for $6.00 per unit. Davis estimates that making the part would require $4.50 per unit of direct materials and $2.00 per unit of direct labor. Davis normally applies overhead using a predetermined overhead rate of 125% of direct labor cost. Davis estimates incremental overhead of $1.50 per unit to make the part. The net incremental cost or savings of making the component is:

Multiple Choice

$2.00 savings per unit.

$2.00 cost per unit.

$3.00 savings per unit.

$3.00 cost per unit.

$1.00 cost per unit.