A. This answer assumes that all of the currently lost contribution can be saved.

B. Before we begin to answer this question numerically, we need to recognize that the information in the question is for 6 months, but the question is asking for annual savings. So, we will need to calculate the savings for six months, then multiply it by 2 to calculate the annual savings.

If the error rate is reduced from 3% to 2%, we can assume that they would save 1/3 of their costs incurred as a result of the errors. Currently, they make 990 mistakes in the processing of their 33,000 invoices. As each error costs $110, this is $108,900. Added to this is the lost $75,000 contribution as a result of cancelled contracts. In total, this is $183,900. By reducing the error rate to 2%, the company would save 1/3 of these total costs, or $61,300, every 6 months. Over a year, this becomes $122,600.

C. This answer assumes that the error rate is reduced to 0%.

D. This is the amount of savings that would result in 6 months. However, the question asks for the annual savings.