Presswick Industries supplies plastics used for medical applications such as pharmaceutical injections and collecting laboratory samples. Presswick produces the containers and tubes and then ships them to customers who incorporate the plastics into kits that are used in hospitals and labs. Currently, Presswick simply loads the containers and tubes into corrugated boxes and ships them to customers who are then responsible for disposing of the corrugated.
Presswick is considering the possibility of using return- able packaging with some of its key customers to be more environmentally friendly and perhaps
reduce cost as well. The current corrugated cost per unit (container or tube) is $0.05 with an additional $0.02 per unit for disposal. The cost of the recyclable
container is $0.25 per unit of capacity that can be used multiple times. The recyclable container does not have to be disposed of, but it must be transported
back to Presswick at a cost of $0.02 per unit of capacity. Assume that the recyclable containers can only be used for one year because the plastic in the
containers begins to break down.
a. At what annual volume level does it make sense to use the recyclable containers versus the corrugated containers?
b. What other qualitative factors should be considered in the decision?