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Stanford Industries manufactures plastic bottles for the food industry. On average, Stanford pays $70 per tonne for its plastics. Stanford's waste disposal company has increased its waste disposal charge to $53 per tonne for solid and inert waste. Stanford generates a total of 500 tonnes of waste per month. Stanford'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 moulds. In the past, Stanford has discarded the machine drool. In an average month, 130 tonnes of machine drool is generated. Management has arrived at three possible courses of action for the machine drool issue: E: (Click the icon to view the courses of action.) Requirements 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) Disposal cost Total annual cost Courses of action Requirements 1. Do nothing and pay the increased waste disposal charge. 2. Sell the machine drool waste to a local recycler for $13 per tonne. 3. Reengineer the production process at an annual cost of $60,000. This change in the production process would reduce the amount of machine drool by 40% each month. The remaining machine drool would then be sold to a local recycler for $13 per tonne. 1. What is the annual cost of the machine drool currently? Include both the original plastic cost and the waste disposal cost. 2. How much would the company save per year (net) if the machine drool were to be sold to the local recycler? 3. How much would the company save per year (net) if the production process were to be reengineered? 4. What do you think the company should do? Explain your rationale. Print Done Print Done

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