As a result of a quality improvement program, Stamford Tools has reduced the number of rejects by 150 units. Improvements in reject rates have also led to a decrease in work in process inventory from $450,000 to $350,000. Inventory carrying costs are estimated to 15% per year. Rejected tools are returned to the initial production stage to be melted and recast. Such rework requires no new materials in casting but requires new materials in finishing. The following unit cost data for direct materials, direct labor, and time-driven activity-based costing (ABC) support are available: Costs Direct materials Direct labor Support Casting $240 $80 $190 Finishing $15 $150 $225 4 Inspection $0 $50 $40 Packing $10 $18 $25 Total $265 $298 $480

What is stamford tools estimated cost saving from the decrease in the reject rate only?

As a result of a quality improvement program, Stamford Tools has reduced the number of rejects by 150 units. Improvements in reject rates have also led to a decrease in work in process inventory from $450,000 to $350,000. Inventory carrying costs are estimated to 15% per year. Rejected tools are returned to the initial production stage to be melted and recast. Such rework requires no new materials in casting but requires new materials in finishing. The following unit cost data for direct materials, direct labor, and time-driven activity-based costing (ABC) support are available