Sell as is or process further (Learning Objective 7)}
Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of \(\$ 800\), yields 500 gallons of plain yogurt. Dairymaid sells the onegallon tubs for \(\$ 6.00\) each and spends \(\$ 0.10\) for each plastic tub. Dairymaid has recently begun to reconsider its strategy. Dairymaid wonders if it would be more profitable to sell individual-size portions of fruited organic yogurt at local food stores. Dairymaid could further process each batch of plain yogurt into 10,667 individual portions ( \(3 / 4\) cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairymaid would sell each individual portion for \(\$ 0.50\). Packaging would cost \(\$ 0.08\) per portion, and fruit would cost \(\$ 0.10\) per portion. Fixed costs would not change. Should Dairymaid 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?