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 3,000 hL of liquid skim milk is $345,000. The selling price of cream is $165.00 per hectolitre and the selling price of liquid skim milk is $80.00 per hectolitre. Steins` Dairy has the opportunity to process further all of its liquid skim milk production into condensed milk which will sell for $275 per hL. The cost of processing 3,000 hL of skim milk to net 2,000 hL of condensed milk is $315,000. Should Steins` sell the liquid skim milk or process it into condensed milk. Show the expected net revenue difference between the two alternatives.

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The Answer of 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 3,000 hL of liquid skim milk is $345,000. The selling price of cream is $165.00 per hectolitre and the selling price of liquid skim milk is $80.00 per hectolitre. Steins` Dairy has the opportunity to process further all of its liquid skim milk production into condensed milk which will sell for $275 per hL. The cost of processing 3,000 hL of skim milk to net 2,000 hL of condensed milk is $315,000. Should Steins` sell the liquid skim milk or process it into condensed milk. Show the expected net revenue difference between the two alternatives.

Steins' Dairy Processes 4,000 Hectolitres (HL) of Fluid Raw Milk