Reconstitute powdered milk to make 1 quart. (Do not use the "Morning Moo" brand. It will not turn into yogurt.) Heat milk to 180° F stirring constantly, if heating on the stove. You can also heat the milk in the microwave. It takes me about 7 minutes in my microwave. Remove from heat and let cool until milk reaches 120–125° F. Set a timer for about 20 minutes so you don't forget about it. Use an instant read food thermometer to measure the temperature. Mix in ¼–½ cup of plain yogurt with active cultures. Stir with a wire whisk. Pour into a thermos and screw on the lid. Allow to incubate for 2 ½–12 hours on your counter. I've found that when I use plain yogurt from the store it takes 4+ hours to set up. If I use my homemade yogurt as a start, it is often done in 2 ½–3 hours. The longer you incubate the yogurt, the tangier it will be. You know it is done when you open your thermos and you see a small amount of clear, yellowish liquid (whey) on the top and thick white yogurt below. If you still see milk, it needs to incubate longer. Quickly close the thermos so you don't lose much heat and let it sit another hour or more before checking again. Refrigerate after incubating. It will thicken a little more as it cools.
I got this Making Yogurt with Powdered milk recipe from All Things Provident. If you haven't checked out her blog yet and you are big into using your food storage, then you are missing out! She has lots of ideas on how to use your food storage for everyday use.
So why make homemade yogurt? It is SUPER cheap, is it easy, healthy, can use it in many recipes, did I say easy? I've made it multiple times and have used it so far for fruit/yogurt popsicles and also for a recipe that called for cream cheese. See the blog to see how to turn the homemade yogurt into sour cream/cream cheese.