Question

Sandler Industries manufactures plastic bottles for the food industry. On average, Sandler pays $70 per ton for its plastics. Sandler's waste-disposal company has increased its waste disposal-charge to $57 per ton for solid and inert waste. Sandler generates a total of 500 tons of waste per month. Sandler's managers have been evaluating the production processes for areas to cut waste. In the process of making plastic bottles, a certain amount of machine "drool" occurs. Machine drool is the excess plastic that drips off the machine between molds. In the past, Sandler has discarded the machine drool. In an average month, 190 tons of machine drool is generated. Management has arrived at three possible courses of action for the machine drool issue
Required:
What is the annual cost of the machine drool currently?

Answer 1

Based on the amount of drool generated, the cost of the plastics, and the disposal cost, the annual cost of the machine drool is $289,560.

What is the annual cost of the machine drool?

This can be found as:

= Material cost of machine drool - Disposal cost

Material cost = (Machine drool generated per month x Number of months in year x Cost of each ton of drool)

Disposal cost = (Machine drool generated per month x Number of months x disposal charge)

Solving gives:

= (190 x 12 x 70) + (190 x 12 x 57)

= 159,600 + 129,960

= $289,560

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