Need business and finance help to know what is the incremental savings

Nov 11th, 2015
RockCafe
Category:
Business & Finance
Price: $5 USD

Question description

Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below:

Cost per Unit

Variable costs

Direct material

$940

Direct labor

600

Variable overhead

300

Fixed costs

Depreciation of equipment

500

Depreciation of building

300

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 production of valves, production 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 production of the valve can be used by another production 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)


Tutor Answer

(Top Tutor) Daniel C.
(997)
School: Cornell University
PREMIUM TUTOR

Studypool has helped 1,244,100 students

3 Reviews


Summary
Quality
Communication
On Time
Value
BlueOcean
Nov 12th, 2016
" Awesome! Exactly what I wanted. "
ashleyisgod
Oct 21st, 2016
" Top quality work from this guy! I'll be back! "
Molly_Moon
Sep 28th, 2016
" AMAZING as always! "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1822 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors