Question: Keister Natural Dairy processes organic milk into plain yogurt Keister
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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