Question: OrganicMaid processes organic milk into plain yogurt OrganicMaid sells plain
OrganicMaid processes organic milk into plain yogurt. OrganicMaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one- gallon containers. Each batch, processed at a cost of $ 870, yields 450 gallons of plain yogurt. OrganicMaid sells the one- gallon tubs for $ 8.00 each, and spends $ 0.10 for each plastic tub. Management has recently begun to reconsider its strategy. OrganicMaid wonders if it would be more profitable to sell individual- sized portions of fruited organic yogurt at local food stores. OrganicMaid 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. OrganicMaid would sell each individual portion for $ 0.40. Packaging would cost $ 0.07 per portion, and fruit would cost $ 0.11 per portion. Fixed costs would not change. Should OrganicMaid 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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