Exploiting Internal Linkages Woodruff Company is currently producing a snowmobile that uses ve specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts required) and expected activity demand (with only commodity parts required) are provided. Activity Current Activity Expected Activity Activities Activity Driver Capacity Demand Demand Material usage Number of parts 192,000 192,000 192,000 Installing parts Direct labor hours 90,000 90,000 72,000 Purchasing parts Number of orders 20,000 17,100 10,500 Additionally, the following activity cost data are provided: ) Material usage: $20 per specialized part used: $16 per commodity part; no fixed activity cost. Installing parts: $14 per direct labor hour; no fixed activity cost. Purchasing parts: Four salaried clerks, each earning a $45,000 annual salary; each clerk is capable of processing 5,000 purchase orders. Variable activity costs: $0.80 per purchase order processed for forms, postage, etc. Required: 1. Calculate the cost reduction produced by using commodity parts instead of specialized parts. Enter your answers as positive amounts. Material usage cost reduction '- 768,000 9' Variable activity costs: $0.80 per purchase order processed for forms, postage, etc. Required: 1. Calculate the cost reduction produced by using commodity parts instead of specialized parts. Enter your answers as positive amounts. Material usage cost reduction 1' Labor usage cost reduction J Purchasing cost reduction if Total savings '_ J 2. Suppose that 50,000 units are being produced and sold for $8,800 per unit and that the price per unit will be reduced by the per-unit savings. What is the new price for the congured product? If required, round your intermediate calculations and final answer to the ) nearest cent. -.- 8,778.59 J 3. What if the expected activity demand for purchase orders was 8,500? How would this affect the answers to Requirements 1 and 2? If required, round your intermediate calculations and final answers to the nearest cent. Total savings 'm' if by X to '-' 46,500 X New price 'Decrease \" J by J to -.- 8,777.66 v"