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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
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 $840, yields 450 gallons of plain yogurt. The company sells the one-gallon tubs for $6.00 each and spends $0.16 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 9,600 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 $0.58. Packaging would cost $0.06 per portion, and fruit would cost $0.12 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? Calculate the net benefit per batch under each alternative. (Enter a "0" for any zero amounts. Round the net benefit per batch to the nearest whole dollar.) Less: Net benefit per unit Net benefit per batch Sell as gallon-size Sell as individual containers portions
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