Waterways has discovered that a small fitting it now manufactures at a unit cost of $$1\mathrm{.}00$ could be bought elsewhere for $$0\mathrm{.}82$ per unit. Waterways has unit fixed manufacturing costs of $$0\mathrm{.}20$ that cannot be eliminated by buying this unit. Waterways needs $434,000$ of these units each year.

If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately $400$ of these units each year. The cost of the unit is $$13\mathrm{.}18.$ To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $$2,346,$ and the unit cost of producing the units would be $$10\mathrm{.}10.$

$($a$)$

Your answer is correct.

Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting.

The company should $$ the fitting. Incremental cost $/($savings$)$ will be $