Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $800, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.14 for each plastic tub. Dairymaid 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. Dairymaid 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. Dairymaid would sell each individual portion for $0.40. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairymaid 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. (Enter a "0" for any zero amounts. Round the net benefit per batch to the nearest whole dollar.) Sell as gallon-size Sell as individual containers portions Less: Net benefit per unit Net benefit per batch
Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $800, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.14 for each plastic tub. Dairymaid 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. Dairymaid 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. Dairymaid would sell each individual portion for $0.40. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairymaid 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. (Enter a "0" for any zero amounts. Round the net benefit per batch to the nearest whole dollar.) Sell as gallon-size Sell as individual containers portions Less: Net benefit per unit Net benefit per batch
Chapter1: Financial Statements And Business Decisions
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Problem 1Q
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Transcribed Image Text:Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of
$800, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.14 for each plastic tub. Dairymaid 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. Dairymaid 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. Dairymaid would sell each individual portion for $0.40. Packaging
would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairymaid 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. (Enter a "0" for any zero amounts. Round the net benefit per batch to the nearest whole dollar.)
Sell as gallon-size
Sell as individual
portions
Less:
Net benefit per unit
Net benefit per batch
containers
X
X
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