Destin Company produces water control valves, made of brass, that it sells primarily to builders for use in commercial real estate

construction. These valves must meet rigid specifications $($i$.$e$.,$ the quality tolerance is small$).$ Valves that, upon inspection, get rejected

are returned to the Casting Department; that is$,$ they are returned to stage $1$ of the four$-$stage manufacturing process. Rejected items

are melted and then recast. As such, no new materials in Casting are required to rework these items. However, new materials must be

added in the Finishing Department for all reworked valves. As the cost accountant for the company, you have prepared the following

cost data regarding the production of a typical valve:

The company, spurred by intense price pressures from foreign manufacturers, recently initiated a number of quality programs. As a

result, the rejection rate for valves has decreased from $7\mathrm{.}3\%$ to $5\mathrm{.}3\%$ of annual output $($equal in total to $15,000$ units$).$ The reduction in

reject rates has enabled the company to reduce its inventory holdings from $$560,000$ to $$330,000.$ Destin estimates that the annual

financing cost associated with inventory holdings is $10\%.$

Required:

What are the estimated manufacturing cost savings per year associated with the reduction in rework costs?

What are the annual financing cost savings associated with the reduction in inventory holdings?

Provide a dollar estimate of the total annual cost savings associated with the recently enacted quality improvements.

$($Do not round intermediate calculations.$)$

Answer is not complete.