E8-51B. Sell as is or process further (Learning Objective 7)OrganicPlus processes organic milk into plain yogurt. OrganicPlus sellsplain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $830, yields 750gallons of plain yogurt. OrganicPlus sells the one-gallon tubs for $6.00each and spends $0.10 for each plastic tub. Management has recentlybegun to reconsider its strategy. OrganicPlus wonders if it would bemore profitable to sell individual-sized portions of fruited organicyogurt at local food stores. OrganicPlus could further process each batchof plain yogurt into 16,000 individual portions (3/4 cup each) of fruitedyogurt. A recent market analysis indicates that demand for the productexists. OrganicPlus would sell each individual portion for $0.40.Packaging would cost $0.07 per portion, and fruit would cost $0.12 perportion. Fixed costs would not change. Should OrganicPlus continue tosell only the gallon-sized plain yogurt (sell as is) or convert the plainyogurt into individual-sized portions of fruited yogurt (process further)?Why?

Differential analysis: Differential analysis refers to the comparison of the differential cost that…

Answered: E8-51B. Sell as is or process further

Business

Accounting

E8-51B. Sell as is or process further

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

E8-51B. Sell as is or process further (Learning Objective 7)
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 $830, yields 750
gallons of plain yogurt. OrganicPlus sells the one-gallon tubs for $6.00
each and spends $0.10 for each plastic tub. Management has recently
begun to reconsider its strategy. OrganicPlus 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 16,000 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 $0.40.
Packaging would cost $0.07 per portion, and fruit would cost $0.12 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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