Naturalmaid processes organic milk into plain yogurt Naturalmaid sells plain yog

Question

Naturalmaid processes organic milk into plain yogurt Naturalmaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulkm one-gallon containers Each batch. processed at a cost of $840, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.10 for each plastic tub Naturalmaid 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. Naturalmaid 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. Naturalmaid would sell each individual portion for $0.50 Packaging would cost $0.07 per portion. and fruit would cost $0.11 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? Calculate the net benefit per batch under each alternative. Based on this analysis, it is more profitable to sell. As long as

Explanation / Answer

Using the values provided in the questiom, we submit the relevant information in the boxed provided to us.

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Solution:

Based on this analysis, it is more profitable to sell plain yogurt as long as there is demand for gallon size-containers.

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The company will be better off by selling plain yogurt in gallon size containers because of higher total benefit per batch as shown from the above calculations.

Sell as Gallon-Size Containers Sell as Individual Portions Sales Revenue Per Unit 7 0.5 Less Additional Processing Costs Per Unit Packaging 0.1 0.07 Additional Processing Costs Per Unit-Adding Fruit 0 0.11 Net Benefit Per Unit (a) 6.9 0.32 Number of Units Produced Per Batch (b) 615 13,120 Net Benefit Per Batch (a*b) $4,244 $4,198

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