E25-20 Making sell or process further decisions

Natural Maid processes organic milk into plain yogurt. Natural Maid sells plain yogurt

to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each

batch, processed at a cost of $840, yields 300 gallons of plain yogurt. Natural Maid

sells the one-gallon tubs for $5 each and spends $0.14 for each plastic tub. Natural-

Maid has recently begun to reconsider its strategy. Natural Maid wonders if it would

be more profitable to sell individual-size portions of fruited organic yogurt at local

food stores. Natural Maid could further process each batch of plain yogurt into 6,400

individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates

that demand for the product exists. Natural Maid would sell each individual portion for

$0.58. Packaging would cost $0.10 per portion, and fruit would cost $0.11 per portion.

Fixed costs would not change.

Should Natural Maid 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?