Question

In: Accounting

Seldon Industries manufactures plastic bottles for the food industry. On​ average, SheldonSheldon pays $ 73$73 per...

Seldon Industries manufactures plastic bottles for the food industry. On​ average,

SheldonSheldon

pays

$ 73$73

per ton for its plastics.

Sheldon'sSheldon's

​waste-disposal company has increased its waste​ disposal-charge to

$ 50$50

per ton for solid and inert waste.

SheldonSheldon

generates a total of

500500

tons of waste per month.

Sheldon'sSheldon'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,

SheldonSheldon

has discarded the machine drool. In an average​ month,

170170

tons of machine drool is generated. Management has arrived at three possible courses of action for the machine drool​ issue:

LOADING...

​(Click the icon to view the courses of​ action.)Read the requirements

LOADING...

.

Requirement 1. What is the annual cost of the machine drool​ currently? Include both the original plastic cost and the​ waste-disposal cost.

Annual cost

Material cost of machine drool (plastic)

$148,920

Disposal cost

102,000

Total annual cost

$250,920

Requirement 2. How much would the company save per year​ (net) if the machine drool were to be sold to the local​ recycler? ​(Use parentheses or a minus sign to show amounts that will reduce the annual savings. If a box is not used in the table leave the box​ empty; do not select a label or enter a​ zero.)

Annual savings (net)

Amount received from local recycler

Reduction in waste-disposal costs

Total annual savings (net)

Choose from any list or enter any number in the input fields and then click Check Answer.

2

parts remaining

Final Check

More Info

1.

Do nothing and pay the increased​ waste-disposal charge.

2.

 Sell the machine drool waste to a local recycler for

$10

per ton.

3.

 ​Re-engineer the production process at an annual cost of

$40,000.

This change in the production process would cause the amount of machine drool generated to be reduced by40%
each month. The remaining machine drool would then be sold to a local recycler for

$10

per ton.

Solutions

Expert Solution

Given Information:

1.Material Cost (Plastic Cost) =$ 73 per ton

2.Waste disposal Charge =$ 50 per ton

3.Waste Generated per month =500 tons

( Waste Generated per year =500 tons* 12 months =6000 tons)

4. Machine drool (Part of waste) generated per month = 170 tons per month

(Machine drool (Part of waste) generated per year= 170 tons*12 months =2040 tons)

Requirement 1 : Calculation of Annual Cost of Machine drool currently:-

Material cost (Plastic) of machine drool (2040 tons per year* 73 per ton)

$148,920

Disposal cost (2040 tons per year * 50 per ton)

102,000

Total annual cost of Machine Drool Currently

$250,920

Requirement 2: Savings per year (Net) if Machine drool were to be sold to local recycler :-

Annual savings (net) :-

Amount received from local recycler 20400

(2040 tons * 10 per ton)

Reduction in waste-disposal costs 148920

(2040 tons * 73 per ton)

Total annual savings (net) $16932

Feel free to ask any clarification if required. Please provide feedback by thumbs up if satisfied. It will be highly appreciated. Thank you.

ekkarill92 answered 2 years ago
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