Question

Organicplus processes organic milk into plain yogurt. Organicplus sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, 4-L containers. Each batch, processed at a cost of $810, yields 550 4-L tubs of plain yogurt. Organicplus sells the 4-L tubs for $8.00 each, and spends $0.12 for each plastic tub. Organicplus has recently begun to reconsider its strategy. The manager wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Organicplus could further process each batch of plain yogurt into 11,579 individual portions (190 mL each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Organicplus would sell each individual portion for $0.50. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Organicplus continue to sell only the 4-L tubs of plain yogurt (sell as is) or convert the plain yogurt into individual-sized portions of fruited yogurt (process further)? Why?


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  • CreatedApril 30, 2015
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