Compostela Farms, Inc. grows and sells tomatoes and tomato products.Each plot yields 1,500 pounds of tomatoes, referred to as a load; of the 1,500 pounds, 1,000 pounds are Grade A tomatoes and 500 are Grade B.The cost of growing and harvesting the tomatoes is $200 per load.Compostela can sell the 1,000 pounds of Grade A tomatoes in a load to grocers for $0.40 per pound.Alternatively, the tomatoes could be processed into hot sauce. Each bottle of hot sauce sells for $1.50 and requires one pound of tomatoes.The cost of additional processing averages $1 per bottle; this amount includes the remaining ingredients, bottles, labor, and needed processing activities.

Which alternative is more cost effective and by how much?

WHAT IF? the best of the Grade A tomatoes, Premium As, could be sold to grocers for $0.80 per pound?Of the 1,000 pounds of Grade A tomatoes in a load, about 30 percent are Premium As.The grocers, however, will not buy the Premium As unless they are also sold the regular Grade A tomatoes.(They will deal with another supplier instead.)It will cost an additional $50 per load to separate the Premium As from the regular Grade As.

Which alternative would be better?

Answer rating: 100% (QA)

To determine which alternative is more costeffective lets compare the two options Option 1 Selling Grade A tomatoes to grocers Selling price per pound ... View the full answer