Question

ACC-2020-X01 Spring 2020 - Johnson Keaton Benson : 02/11/20 10:14 PM Homework: Chapter 5 Homework Save Score: 0.63 of 4 pts 12 of 12 (7 complete) HW Score: 40.72%, 12.21 of 30 pts %E5-34A (similar to) Question Help O Sandler Industries manufactures plastic bottles for the food industry. On average, Sandler pays $78 per ton for its plastics. Sandler's waste disposal company has increased its waste disposal-charge to $53 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, 120 tons of machine drool is generated. Management has arrived at three possible courses of action for the machine drool issue: (Click the icon to view the courses of action.) More Info Read the requirements. Annual savings (net) Reduction in direct material costs (plastic) Reduction in waste-disposal costs Amount received from local recycler 1. Do nothing and pay the increased waste-disposal charge. 2. Sell the machine drool waste to a local recycler for $20 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 by 40% each month. The remaining machine drool would then be sold to a local recycler for $20 per ton. Annual cost to re-engineer Total annual savings (net) Print Done Choose from any list or enter any number in the input fields and then click Check A parts 2 remaining Clear All Check Answer

Answer 1

If Sandler Industries re-engineer the production process, the machine drool would be reduced by 40% each month.

Amount of reduction in drool = 120 * 40% = 48 tonnes per month

Annual reduction = 48 * 12 = 576 tonnes

Remaining drool = (120 - 48) = 72 tonnes per month

The reduction of 576 tonnes will result in savings in direct material and waste disposal costs.

Reduction in Direct Materials Costs (576*78) = $44,928

Reduction in Waste Disposal Costs (576*53) =$30,528

Amount received from local recycler [ 72* 12 * 20) = $17,280

Annual Cost to Engineer = $40,000

Total annual savings(net) = $44,928 + $30,528 + $17,280 - $40,000 = $52,736