Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, 4-L containers. Each batch, processed at a cost of $800, yields 2000 (500 4-L containers) of plain yogurt. Dairymaid sells the 4-L tubs for $6.00 each and spends $0.10 for each plastic tub. Dairymaid has recently begun to reconsider its strategy. Dairymaid wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Dairymaid could further process each batch of plain yogurt into 10,526 individual portions (190 mL each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairymaid would sell each individual portion for $0.50. Packaging would cost $0.08 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairymaid continue to sell only the 4-L tubs of plain yogurt (sell as is) or convert the plain yogurt into individual-sized portions of fruited yogurt (process further)? Why?

  • CreatedApril 30, 2015
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