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?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
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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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