A small brewery reuses its own empty bottles, but it does not have a bottle-cleaning machine. The empty' bottles are collected from liquor stores and bars, and brought back to the brewery. Once enough empty bottles accumulate, they are trucked to a cleaning facility and clean bottles are brought back. The cleaning facility charges 10 cents to wash a bottle, and cost of trucking is 2 cents per bottle. Management is thinking of buying an automated bottle-cleaning machine. The machine costs $ 1 million and has a useful life of 10 years. The machine will be used only when enough empty bottles accumulate. The operating cost of the machine is expected to be $108 per hour, washing 60 bottles per minute.
a. How many bottles per year would have equal total annual cost of doing the cleaning in-house vs. outsourcing the cleaning? Use straight-line depreciation.
b. What is the total annual cost at the quantity found in part a?
c. Draw the two total annual costs vs. the quantity of bottles per year. Make sure that the y-axis is to scale, [f tire brewery is expected to have 1 million bottles per year to wash, which decision is less costly?