Question

Natural-plus processes organic milk into plain yogurt. Natural-plus sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $820, yields 1,200 gallons of plain yogurt. Natural-plus sells the one-gallon tubs for $5 each and spends $0.10 for each plastic tub. Natural-plus has recently begun to reconsider its strategy. Natural-plus wonders if it would be more profitable to sell individual-size portions of fruited organic yogurt at local food stores. Natural-plus could further process each batch of plain yogurt into 25,600 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Natural-plus would sell each individual portion for $0.54. Packaging would cost $0.08 per portion, and fruit would cost $0.07 per portion. Fixed costs would not change.
Should Natural-plus 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?


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  • CreatedJune 15, 2015
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