Braum, Inc. produces milk at a total cost of $66,000. The production generates 60,000 gallons of milk which can be sold for $1 per gallon to a pasteurization company, or the milk can be processed further into ice cream and then sold for $2.50 per gallon. It costs $75,000 more to turn the annual milk supply into ice cream.
Instructions
If Braum processes the milk into ice cream, how much is the incremental profit or loss? Should Braum process the milk into ice cream or sell it as is?