Howell Corporaon produces an execuve jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below: Cost per Unit Variable costs Direct material $900 Direct labor 600 Variable overhead 300 Fixed costs Depreciaon of equipment 500 Depreciaon of building 200 Supervisory salaries 300 The company has an offer from Duvall Valves to produce the part for $2,000 per unit and supply 1,000 valves (the number needed in the coming year). If the company accepts this offer and shuts down producon of valves, producon workers and supervisors will be reassigned to other areas. The equipment cannot be used elsewhere in the company, and it has no market value. However, the space occupied by the producon of the valve can be used by another producon group that is currently leasing space for $55,000 per year. What is the incremental savings of buying the valves? (The answer should be stated in a per‐unit format and is a positive number)
Howell Corporaon produces an execuve jet for which it currently manufactures a fuel valve; the cost of
the valve is indicated below:
Cost per Unit
Variable costs
Direct material $900
Direct labor 600
Variable overhead 300
Fixed costs
Depreciaon of equipment 500
Depreciaon of building 200
Supervisory salaries 300
The company has an offer from Duvall Valves to produce the part for $2,000 per unit and supply 1,000 valves
(the number needed in the coming year). If the company accepts this offer and shuts down producon of
valves, producon workers and supervisors will be reassigned to other areas. The equipment cannot be used
elsewhere in the company, and it has no market value. However, the space occupied by the producon of the
valve can be used by another producon group that is currently leasing space for $55,000 per year.
What is the incremental savings of buying the valves? (The answer should be stated in a per‐unit format and is a positive number)
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