NaturalmaidNaturalmaid

processes organic milk into plain yogurt.

NaturalmaidNaturalmaid

sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of

$890,

yields

585585

gallons of plain yogurt. The company sells the one-gallon tubs for

$5.00

each and spends

$0.12

for each plastic tub.

NaturalmaidNaturalmaid

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.

NaturalmaidNaturalmaid

could further process each batch of plain yogurt into

12,480

individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists.

NaturalmaidNaturalmaid

would sell each individual portion for

$ 0.52$0.52.

Packaging would cost

$0.08

per portion, and fruit would cost

$0.09

per portion. Fixed costs would not change. Should

Naturalmaid

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?

		Sell as gallon size containers	Sell as indiv. portions
Less
Net benefit per unit
Net beneifit per batch