Question

Organicfood processes organic milk into plain yogurt i (Click the icon to view additional information.) Should Organicfood continue to sell only the gallon-size plain yogurt (sell as is) or convert the plain yogurt into individual-size portions of fruited yogurt (process further)? Why? (Use a minus sign or parentheses for amounts that are typically shown enclosed in parentheses in a sell or process further decision.) Process Sell As Is Further Difference Costs More Info Expected revenue from selling by the gallon Expected revenue from selling individual portions Organicfood sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $890, yields 1,200 gallons of plain yogurt. Organicfood sells the one-gallon tubs for $6 each, and spends $0.24 for each plastic tub. Organicfood has recently begun to reconsider its strategy. Organicfood wonders if it would be more profitable to sell individual-size portions of fruited organic yogurt at local food stores. Organicfood could further process each batch of plain yogurt into 25,600 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Organicfood would sell each individual portion for $0.62. Packaging would cost $0.07 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change Additional costs of selling as is by the gallon Additional costs of processing individual portions Total net revenue X

Answer 1

Sell As is [1200 x $6] Costs Expected revenue from selling by the gallon Expexted Revenue from selling individual portions Additional costs of selling as is by the gallon | Additional costs of processing individual portions Net Revenue Process Further Difference $7,200 (25600 x $0.62] $15,872 [$15872-$7200] -$288 [25600 x $0.17] -$4,352 [$4352-$288] $6,912 $11,520 $8,672 [1200 x $0.24] -$4,064 $4,608 Organic food should process the plain youhurt to individual size poerions of fruit yoghurt as the net revenue increases by $4608