Question

Keister Natural Dairy processes organic milk into plain yogurt. Keister sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one- gallon containers. Each batch, processed at a cost of $ 820, yields 450 gallons of plain yogurt. The company sells the one- gallon tubs for $ 5.00 each and spends $ 0.16 for each plastic tub. Keister has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual- sized portions of fruited organic yogurt at local food stores. Keister could further process each batch of plain yogurt into 9,600 individual portions (3/ 4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Keister would sell each individual portion for $ 0.54. Packaging would cost $ 0.08 per portion, and fruit would cost $ 0.10 per portion. Fixed costs would not change. Should Keister continue to sell only the gallon- sized plain yogurt ( sell as is) or convert the plain yogurt into individual- sized portions of fruited yogurt ( process further)? Why?



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  • CreatedAugust 27, 2014
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