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SHOULD NATURAL MAID CONTINUE TO SELL ONLY THE GALLON-SIZE PLAIN YOGURT (SELL AS IS), OR CONVERT.
Making sell as is or process further decisions Naturalmaid processes organic milk into plain yogurt. Naturalmaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $800, yields 600 gallons of plain yogurt. Naturalmaid sells the one-gallon tubs for $7 each and spends $0.16 for each plastic tub. Naturalmaid has recently begun to reconsider its strategy. Naturalmaid wonders if it would be more profitable to sell individual-size portions of fruited organic yogurt at local food stores. Naturalmaid could further process each batch of plain yogurt into 12,800 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Naturalmaid would sell each individual portion for $0.54. Packaging would cost $0.07 per portion, and fruit would cost $0.11 per portion. Fixed costs would not change.
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