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.

Activities	Activity Driver	Activity Capacity	Current Activity Demand	Expected Activity 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	$fill in the blank 1
Labor usage cost reduction	fill in the blank 2
Purchasing cost reduction	fill in the blank 3
Total savings	$fill in the blank 4

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. $fill in the blank 5

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		by	$fill in the blank 7	to	$fill in the blank 8
New price		by	$fill in the blank 10	to	$fill in the blank 11