Assume that dan amp barrys sells ice cream for 3 per quart, Ask an Expert

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Assume that Dan & Barry's sells ice cream for $3 per quart. The cost of each quart follows:
Materials .......................................................................................................... $1.00
Labor .................................................................................................................. 0.50
Variable Overhead ............................................................................................. 0.25
Fixed Overhead ($20,000 per month, 20,000 quarts per month)....................... 1.00
Total Cost per Quart ........................................................................................ $2.75

One of Dan & Barry's regular customers asked the company to fill a special order of 400 quarts at a selling price of $2.50 per quart for a special picnic. Dan & Barry's can fill the order using existing capacity without affecting total fixed costs for the month.Dan & Barry's general manager was concerned about selling the ice cream below the cost of $2.75 per quart and has asked for your advice.

Question:

How will the impact of producing the special order of 400 quarts of ice cream in addition to the regular production of 20,000 quarts of ice cream affect operating profit?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9967809

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