Reference no: EM132707335

Compostela Farms, Inc. grows and sells tomatoes and tomato products. Each plot yields 1,500 pounds of tomatoes, referred to as a load; of the 1,500 pounds, 1,000 pounds are Grade A tomatoes and 500 are Grade B. The cost of growing and harvesting the tomatoes is $200 per load. Compostela can sell the 1,000 pounds of Grade A tomatoes in a load to grocers for $0.40 per pound. Alternatively, the tomatoes could be processed into hot sauce. Each bottle of hot sauce sells for $1.50 and requires one pound of tomatoes. The cost of additional processing averages $1 per bottle; this amount includes the remaining ingredients, bottles, labor, and needed processing activities.

Problem 1: Which alternative is more cost effective and by how much?