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Author Question: Steins' Dairy processes 4,000 hectolitres (hL) of fluid raw milk per month. One hectolitre equals ... (Read 203 times)


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Steins' Dairy processes 4,000 hectolitres (hL) of fluid raw milk per month. One hectolitre equals 100 litres. After the raw milk is received at the dairy it is separated by machines into cream and liquid skim milk. The cost of processing the 4,000 hL of raw milk up to the split off point to yield 1,000 hL of cream and 3,000hL of liquid skim milk is $345,000. The selling price of cream is $155.00 per hectolitre and the selling price of liquid skim milk is $75.00 per hectolitre. Steins` Dairy has the opportunity to process further all of its cream production into whipping cream which will sell for $385 per hL. The cost of processing 1,000hL of cream to net 800 hL of whipping cream is $135,000.  Should Steins` sell the cream or process it into whipping cream. Show the expected net revenue difference between the two alternatives.

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Marked as best answer by waynest on Jan 4, 2020


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