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E8-28A (similar to) Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each
E8-28A (similar to) 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 $850, yields 525 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.14 for each plastic tub. Dairymaid 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. Dairymaid could further process each batch of plain yogurt into 11,200 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 $0.54. Packaging would cost $0.07 per portion, and fruit would cost $0.09 per portion. Fixed costs would not change. Should Dairymaid 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
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