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Ligo Dairy Farm sells milk for $2.50 per gallon. Ligo Dairy wants to investigate if it would be financially wise to further process their milk
Ligo Dairy Farm sells milk for $2.50 per gallon. Ligo Dairy wants to investigate if it would be financially wise to further process their milk to make butter, which they could sell for $3.75 per pound. Ligo's batch sizes are 1,000 gallons of milk, which will make 400 pounds of butter. The total cost of producing the milk is $750 and the total cost of manufacturing the butter is $900. Should Ligo sell milk or process it further to sell butter, and why? Ligo Dairy should sell butter. They will make an additional profit of $600 per batch. Ligo Dairy should sell milk. They will incur a loss of $1,750 if they sell butter. Ligo Dairy should sell milk. They will incur a loss of $1,150 if they sell butter. Ligo Dairy should sell butter. They will make an additional profit of $1,500 per batch
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