Question

All Natural processes organic milk into plain yogurt. All Natural sells plain yogurt to​ hospitals, nursing​ homes, and restaurants in​ bulk, one-gallon containers. Each​ batch, processed at a cost of $810​, yields 645 gallons of plain yogurt. The company sells the​ one-gallon tubs for $8.00 each and spends $0.12 for each plastic tub. All Natural 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. All Natural could further process each batch of plain yogurt into 13,760 individual portions​ (3/4 cup​ each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. All Natural would sell each individual portion for $0.54. Packaging would cost $0.07 per​ portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should All Natural 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 containers		Sell as individual portions
Less:
Net benefit per unit
		x		x
Net benefit per batch

Answer 1