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Problem - A plant produces 75 different electronic products. Each product requires an average of six components that are purchased externally. By redesigning the products, it is possible to produce the 75 products so that they all have three components in common. This will reduce the demand for purchasing, receiving, and paying bills. Estimated savings from the reduced demand are $1,200,000 per year.
Required - Calculate the nonvalue-added cost of purchasing, receiving and paying bills.
a. $1,200,000
b. $1,000,000
c. $900,000
d. $600,000
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