Homework answers / question archive / Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below:    Variable costs   Direct material $900 Direct labor 600 Variable overhead 300     Fixed costs   Depreciation of equipment 500 Depreciation of building 250 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)

Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below:    Variable costs   Direct material $900 Direct labor 600 Variable overhead 300     Fixed costs   Depreciation of equipment 500 Depreciation of building 250 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)

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

 

 Variable costs

 

Direct material

$900

Direct labor

600

Variable overhead

300

 

 

Fixed costs

 

Depreciation of equipment

500

Depreciation of building

250

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)

Round to two decimal places.