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 $870, yields 645 gallons of plain yogurt. The company sells the one-gallon tubs for $6.00 each and spends $0.12 for each plastic tub. Organicplus 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. Organicplus 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. Organicplus would sell each individual portion for $0.52. Packaging would cost $0.06 per portion, and fruit would cost $0.10 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?
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 $870, yields 645 gallons of plain yogurt. The company sells the one-gallon tubs for $6.00 each and spends $0.12 for each plastic tub. Organicplus 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. Organicplus 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. Organicplus would sell each individual portion for $0.52. Packaging would cost $0.06 per portion, and fruit would cost $0.10 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?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
Problem 2CE: Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of 52...
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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 $870, yields 645 gallons of plain yogurt. The company sells the one-gallon tubs for $6.00 each and spends $0.12 for each plastic tub. Organicplus 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. Organicplus 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. Organicplus would sell each individual portion for $0.52. Packaging would cost $0.06 per portion, and fruit would cost $0.10 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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