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Best Dairy processes organic milk into plain yogurt. Best Dairy sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $ 870, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $ 7.00 each and spends $ 0.14 for each plastic tub. Best Dairy has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Best Dairy could further process each batch of plain yogurt into 13 comma 120 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Best Dairy would sell each individual portion for $ 0.40. Packaging would cost $ 0.05 per portion, and fruit would cost $ 0.11 per portion. Fixed costs would not change. Should Best Dairy 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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Best Dairy processes organic milk into plain yogurt. Best Dairy sells plain yogurt to hospitals, nur...
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