How will the impact of producing the special order of 400

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Reference no: EM13590232

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?

Reference no: EM13590232

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