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 wonders 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.
Requirement
1. 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?