Destin Company produces water control valves, made of brass, which 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 one 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 Cost Direct materials Direct labor Variable manufacturing overhead Allocated fixed overhead Casting Finishing Inspection Packing Total $ 11 155 185 115 $270 290 360 145 170 105 30 30 75 30 30 45 $690 $466 $114 $1,405 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 5.5% to 4.5% of annual output (equal in total to 13,000 units). The reduction in reject rates has enabled the company to reduce its inventory holdings from $470,000 to S285,000. Destin estimates that the annual financing cost associated with inventory holdings is 10% Required Provide a dollar estimate of the annual cost savings associated with the recently enacted quality improvements. (Do not round intermediate calculations.) Manufacturing cost savings Financing cost savings Total estimated savings