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    The Cartridge Dilemma

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    shikhar
    The document discusses three options for a company to deal with used toner cartridges from its laser printers in accordance with government regulations: 1) Design cartridges for customer refilling; 2) Design cartridges for the company to recover and refill; 3) Design cartridges for the company to recover, crush, and sell the plastic scrap. The company is considering these options for a new printer model and analyzes the costs and profit implications of each alternative.

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    The Cartridge Dilemma

    Uploaded by

    shikhar
    160 views2 pages
    The document discusses three options for a company to deal with used toner cartridges from its laser printers in accordance with government regulations: 1) Design cartridges for customer refilling; 2) Design cartridges for the company to recover and refill; 3) Design cartridges for the company to recover, crush, and sell the plastic scrap. The company is considering these options for a new printer model and analyzes the costs and profit implications of each alternative.

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    The Cartridge Dilemma

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    The document discusses three options for a company to deal with used toner cartridges from its laser printers in accordance with government regulations: 1) Design cartridges for customer refilling; 2) Design cartridges for the company to recover and refill; 3) Design cartridges for the company to recover, crush, and sell the plastic scrap. The company is considering these options for a new printer model and analyzes the costs and profit implications of each alternative.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    160 views2 pages

    The Cartridge Dilemma

    Uploaded by

    shikhar
    The document discusses three options for a company to deal with used toner cartridges from its laser printers in accordance with government regulations: 1) Design cartridges for customer refilling; 2) Design cartridges for the company to recover and refill; 3) Design cartridges for the company to recover, crush, and sell the plastic scrap. The company is considering these options for a new printer model and analyzes the costs and profit implications of each alternative.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    The Cartridge Dilemma

    St. Agatha Company manufactures laser printers. Government agencies have


    advised the company that for all new products it will have to provide for
    recycling of used toner cartridges.
    A study has determined that St. Agatha Company has three options. It can
    design a printer with cartridges that the customer refills with toner, eliminating
    the need to recycle the cartridges. It can design cartridges that it will recover
    and refill with toner. Or it can design cartridges that it will recover, crush, and
    sell the resulting plastic as scrap.
    Planners at the company are considering the design of a cartridge for a new
    printer. The company expects that customers will use about 6, 00,000 cartridges
    a year during the five-year manufacturing life of the new printer. After that, the
    company expects that cartridge use will fall at the rate of 2, 00,000 per year.
    The cost of making a cartridge is $60. Assume that the companys before tax
    cost of capital is 12%.
    Marketing staff estimates that printer sales will suffer if it offers a cartridge that
    customers have to refill. Therefore they plan to cut the printer prices to maintain
    volume. The net effect on profit is expected to be about $6,000,000 per year
    during the five year manufacturing life of the printer. Under this alternative, the
    company would price the replacement toner to breakeven and would make 2, 50,
    000 cartridges in each of the five year manufacturing life of the new printer with
    the balance of use in the first five years and the last two years accounted for by
    refills.
    The marketing staff estimated that for every 100 cartridges used, only 80 will be
    returned. Returns are made in the year that the cartridge is used. The company
    is expected to pay a $15 landfill fee at the end of the products lifetime for every
    cartridge disposed of.
    The cost to clean and refill a cartridge is $20.
    Under this alternative, the
    company would make 5,00,000 cartridges in each of the first two years and rely
    on recovered cartridges after that.
    If the company chooses the crushing alternative, it must purchase a plastic
    recovery machine at the start of the project. The cost of machine is $5,000,000
    and it would be useless when the product is abandoned. The recycled plastic s
    and other material can be sold to yield $38 per cartridge. Ignore the effects of
    taxes in answering questions.
    If the companys objective is to minimize the take-back cost, which of the
    following alternative should it pursue?
    1. Make a cartridge that customer can refill, OR
    2. Make a cartridge that is recycled, OR
    3. Make a cartridge that is recovered, crushed, and remanufactured?

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