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	140,000	140,000	140,000
Installing parts	Direct labor hours	24,000	24,000	19,200
Purchasing parts	Number of orders	28,400	24,282	14,910

Additionally, the following activity cost data are provided:

Material usage: $28 per specialized part used; $19 per commodity part; no fixed activity cost.

Installing parts: $26 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 7,100 purchase orders. Variable activity costs: $1.20 per purchase order processed for forms, postage, etc.

A.Cost reduction produced by using commodity parts instead of specialized parts.

Material usage cost reduction	$1,260.000
Labor usage cost reduction	124,800
Purchasing cost reduction	56,246,40
Total savings	$1,441,046.40

B.Suppose that 71,000 units are being produced and sold for $8,300 per unit and that the price per unit will be reduced by the per-unit savings. New price for the configured product is: $8,279.70

Required:

1. What if the expected activity demand for purchase orders was 12,070? How would this affect the answers to A and B? If required, round your intermediate calculations and final answers to the nearest cent.

Total savings	Increase	by	$________	to	$________
New price	Decrease	by	$________	to	$________