QwakSoda Corporation makes soda in three departments: blending, bottling, and labeling. Currently, the output from the blending department first moves through the bottling department and then through the labeling department before it is sold to retail distributors for \($150\) per 100 bottles. QwakSoda provides the following information:

Although QwakSoda, currently, has no production constraints in the blending department, it can start with only 70,000 bottles in the bottling department because of the capacity constraints of the machines. Of the 70,000 bottles produced in the bottling department, 2,800 (4%) defective bottles are scrapped at zero net disposal value. The good bottles from the bottling department are sent to the labeling department. Of the 67,200 good bottles started at the labeling operation, 3,360 (5%) defective bottles are scrapped at zero net disposal value. QwakSoda Corporation’s total monthly sales of bottles equals the labeling department’s output.
1. The labeling department is considering buying 15,000 bottles to label from an outside supplier at \($75\) per 100 bottles, which is much higher than QwakSoda’s cost to manufacture the bottles. The labeling department expects that 10% of the bottles obtained from the outside supplier will result in defective products.
Should the labeling department buy the bottles from the outside supplier? Show your calculations.
2. QwakSoda’s engineers have developed a method that would lower the labeling department’s rate of defective products to 2.5% at the labeling operation. Implementing the new method would cost \($1\),500 per month. Should QwakSoda implement the change? Show your calculations.
3. The design engineering team has proposed a modification that would lower the bottling department’s rate of defective products to 1.5%. The modification would cost the company \($200\) per month. Should QwakSoda implement the change? Show your calculations.

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Bottling Labeling Monthly capacity (in bottles) 70,000 80,000 Monthly production (in bottles) 67,200 63,840 Direct material cost per 100 bottles 50 5 Fixed operating costs $50,000 $40,000