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Organicplus processes organic milk into plain yogurt. Organicplus sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at
Organicplus processes organic milk into plain yogurt. Organicplus sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $880, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $5.00 each and spends $0.16 for each plastic tub. Organicplus 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. Organicplus could further process each batch of plain yogurt into 13,120 individual portions ( 3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Organicplus would sell each individual portion for $0.44. Packaging would cost $0.08 per portion, and fruit would cost $0.11 per portion. Fixed costs would not change. Should Organicplus 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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