Problem
Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component for its satellites from a European firm. An Orbital Communications engineering team has found a way to use the company's own component, part number A200, instead of the European component. However, the Orbital Communications component must be modified at a cost of $690 per part. The European component costs $9, 500 per part. Orbital Communications part number A200 costs $5, 300 before it is modified. Orbital Communications currently uses 15 of the European components per year.
Calculate the annual differential cost between Orbital Communications' two production alternatives.