Reference no: EM131850025

A small brewery reuses its own empty bottles, but it does not have a bottle-cleaning machine. A delivery truck collects the empty bottles from liquor stores and bars and brings them back to the brewery. Once enough empty bottles accumulate, the truck transports them to a cleaning facility and brings back clean bottles. The cleaning facility charges 11 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 $1.5 million and has a useful life of 10 years. The brewery will use the machine only when enough empty bottles accumulate. The operating cost of the machine will be $108 per hour, and it can wash 60 bottles per minute.

a. At what quantity of bottles would total annual cost of cleaning in-house equal total annual cost of outsourcing the cleaning? Use straight-line depreciation (i.e., depreciation cost per year = $150,000).