Naturalmaid processes organic milk into plain yogurt. Naturalmaid sells plain ­yogurt to hospitals, nursing homes, and restaurants in bulk, one- gallon ­containers. Each batch, processed at a cost of $ 800, yields 600 gallons of plain yogurt. Naturalmaid sells the one- gallon tubs for $ 7 each and spends $ 0.16 for each plastic tub. Naturalmaid has recently begun to reconsider its strategy. Naturalmaid won-ders if it would be more profitable to sell individual- size portions of fruited organic yogurt at local food stores. Naturalmaid could further process each batch of plain yogurt into 12,800 individual portions (3/ 4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Naturalmaid would sell each individual portion for $ 0.54. Packaging would cost $ 0.07 per portion, and fruit would cost $ 0.11 per portion. Fixed costs would not change. Should Naturalmaid continue to sell only the gallon- size plain yogurt (sell as is) or convert the plain yogurt into individual- size portions of fruited yogurt ( process further)? Why?
Buoy manufactures flotation vests in Charleston, South Carolina. Buoy’s contribution margin income statement for the month ended December 31, 2014, contains the following data:

  • CreatedJanuary 16, 2015
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