In order to save valuable time in coating and sharpening, management is considering forming a separate inspection station before the coating and sharpening process. The inspection station can utilize existing smoothing and buffing equipment, and it can be staffed on an as-needed bases by an employee who normally works in the chemical bath area, which has excess capacity )so the employee will not be missed for brief periods). Management estimates that this action will free up 240 hours in coating and sharpening ([an average of 5 min per hour x 8 hour per day x 360 operating days per year]/60. Management has calculated that the average contribution margin per unit for its product is $300. The average contribution margin per hour spent in coating and sharpening is $850.

Based on this information, estimate the incremental profit per year associated with adding the new inspection station.

Model C210 Model D400 Chisel Chisel Selling Price S 500.00 S 850.00 Less Variable Costs: Direct Labor 5 85.00 180.00 Direct Material $ 150.00 180.00 Varialbe Overhead $ 15.00 250.00 60.00 420.00 Contribution Margin 250.00 S 430.00 Less Allocated Fixed Costs 5 185.00 5 230.00 Profit Per Unit 65.00 200.00 Time in coating and sharpening to produce 1 unit (in hours) 0.2 0.8