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 Labor usage cost reduction Purchasing cost reduction Total savings 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 configured product? If required, round your intermediate calculations and final answer to the nearest cent. 768,000 252,000 5,280 X 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 Increase by to Decrease by New price to Feedback Y Check My Work 1. See Cornerstone 11.1. Use information given to calculate cost reduction. 2. New price-old price per unit-(Total savings new units given) 3. Recalculate using new purchase orders activity Exploiting Internal Linkages Woodruff Company is currently producing a snowmobile that uses five 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 Capacity Activities Material usage Installing partsDirect labor hours Purchasing parts Number of orders 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 derk 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 Labor usage cost reduction Purchasing cost reduction Total savings Activity Driver Number of parts Demand 192,000 90,000 17,100 Demand 192,000 90,000 20,000 192,000 72,000 10,500 768,000 252,000 5,280 x