TwoShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is purchased by OEM (Original Equipment Manufacturers) such as Mercury and Honda, for use in the larger and more powerful outboards. The units sell for $980, and sales volume averages 33,600 units per year. Recently, TwoShaft's major competitor lowered the price of the equivalent part to $750. The market was very competitive, and TwoShaft realized it had to meet the new price or lose significant market share. The controller assembled the following data for the most recent year:

Cost and Usage for Production of 33,600 Units
	Standard Cost				Actual Quantity			Actual Cost
Materials	$	6,672,000						$	7,152,000
Direct labor		2,288,000							2,192,000
Indirect labor		3,280,000							3,088,000
Inspection (hours)					4,200				554,000
Materials handling (number of purchases)					73,800				402,300
Machine setups					5,400				1,505,800
Returns and rework (number of times)					1,020				97,500
Total								$	14,991,600