They are seeking permission to buy ice cream from outside

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Hawkeye runs a chain of drive in ice cream stands. They rented an ice cream machine for summer for $3,600. The manager of the ice cream machine charges the stand $4 per gallon.

Sales to the stands (16,000 gal @ $4) 64,000

Variable costs at $2.10 per gal 33,600

Fixed Costs

Rental of Machine 3,600

Other Fixed Costs 10,000 47,200

Operation Margin 16,800

They are seeking permission to buy ice cream from outside supplier at $3.35 per gallon.They uses 4,000 gallons of ice cream. Other fixed costs of operating the machine will decrease by $900. Form an analysis fo the request in terms of overall company objectives and explain the conclusion. What isthe transfer price?

Reference no: EM13578926

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