Rose Hill, a soybean farm in northern Minnesota, has a herd of 50 dairy cows. The cows produce approximately 2,800 gallons of milk per week. The farm currently sells all its milk to a nearby processor for $1.25 per gallon, a significant drop from the $2.00 per gallor they were able to charge five years ago. It costs $1.60 per gallon to produce the milk. The owners of Rose Hill are deciding whether to sell the dairy cows or expand into the artisan cheese market. Both owners have prior cheese-making experience and they already have all the needed equipment. It takes 0.8 gallons of milk to make a pound of cheese. Costs to produce a pound of cheese are expected to total $7 per pound. Artisan cheeses are currently selling for $10 per pound at farmer's markets and upscale groceries. Required a. How much incremental profit would Rose Hill recognize if half the milk each week was used make cheese? $1,050 x b. How much, in total, would Rose Hill earn each week if half the milk was used to make cheese and half was sold to the processor? $1,225 x c. How much of the milk would need to be used to make cheese each week in order for Rose Hill to break even on its dairy operations assuming no cows were sold? (Note: Any milk not used to make cheese would still be sold to a processor.) Note: Do not round your answers. 12,250 * gallons of milk used to make cheese 12,250 x gallons of milk sold to a processor
Rose Hill, a soybean farm in northern Minnesota, has a herd of 50 dairy cows. The cows produce approximately 2,800 gallons of milk per week. The farm currently sells all its milk to a nearby processor for $1.25 per gallon, a significant drop from the $2.00 per gallor they were able to charge five years ago. It costs $1.60 per gallon to produce the milk. The owners of Rose Hill are deciding whether to sell the dairy cows or expand into the artisan cheese market. Both owners have prior cheese-making experience and they already have all the needed equipment. It takes 0.8 gallons of milk to make a pound of cheese. Costs to produce a pound of cheese are expected to total $7 per pound. Artisan cheeses are currently selling for $10 per pound at farmer's markets and upscale groceries. Required a. How much incremental profit would Rose Hill recognize if half the milk each week was used make cheese? $1,050 x b. How much, in total, would Rose Hill earn each week if half the milk was used to make cheese and half was sold to the processor? $1,225 x c. How much of the milk would need to be used to make cheese each week in order for Rose Hill to break even on its dairy operations assuming no cows were sold? (Note: Any milk not used to make cheese would still be sold to a processor.) Note: Do not round your answers. 12,250 * gallons of milk used to make cheese 12,250 x gallons of milk sold to a processor
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Sell of Process Further
Rose Hill, a soybean farm in northern Minnesota, has a herd of 50 dairy cows. The cows produce approximately 2,800 gallons of milk per week. The farm currently sells all its milk to a nearby processor for $1.25 per gallon, a significant drop from the $2.00 per gallon
they were able to charge five years ago. It costs $1.60 per gallon to produce the milk.
The owners of Rose Hill are deciding whether to sell the dairy cows or expand into the artisan cheese market. Both owners have prior cheese-making experience and they already have all the needed equipment.
It takes 0.8 gallons of milk to make a pound of cheese. Costs to produce a pound of cheese are expected to total $7 per pound. Artisan cheeses are currently selling for $10 per pound at farmer's markets and upscale groceries.
Required
a. How much incremental profit would Rose Hill recognize if half the milk each week was used to make cheese?
$ 1,050 X
b. How much, in total, would Rose Hill earn each week if half the milk was used to make cheese and half was sold to the processor?
$ 1,225 X
c. How much of the milk would need to be used to make cheese each week in order for Rose Hill to break even on its dairy operations assuming no cows were sold? (Note: Any milk not used to make cheese would still be sold to a processor.)
Note: Do not round your answers.
12,250 X gallons of milk used to make cheese
12,250 X gallons of milk sold to a processor
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education