Sell as is or process further (Learning Objective 7)

Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hos¬ pitals, 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 one- gallon 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?