Question
Dairyfood processes organic milk into plain yogurt. Dairyfood sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one gallon containers. Each batch, processed
Dairyfood processes organic milk into plain yogurt. Dairyfood sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one gallon containers. Each batch, processed at a cost of $800, yields 600 gallons of plain yogurt. Dairyfood sells the one-gallon tubs for $5 each, and spends $0.18 for each plastic tub. Dairyfood has recently begun to reconsider its strategy. Dairyfood wonders if it would be more profitable to sell individual-size portions of fruited organic yogurt at local food stores. Dairyfood could further process each batch of plain yogurt into 12,800 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairyfood would sell each individual portion for $0.60. Packaging would cost $0.14 per portion, and fruit would cost $0.11 per portion. Fixed costs would not change.
Should Dairyfood continue to sell only the gallon-size plan yogurt(sell as is) or convert the plain yogurt into individual size portions of fruited yogurt(process further)? Why? (use a minus sign or parentheses for amounts that are typically shown enclosed in parentheses in a sell or process further decision)
Answer with a table in this format:
Costs | Sell as Is | Process Further | Difference |
Expected Revenue from selling by the Gallon | |||
Expected revenue from selling individual portions | |||
Additional costs of selling as is by the gallon | |||
Total net revenue |
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