Cost Analysis for Pricing: Icies sells ice cream for $3.00 per quart. The cost of each quart is as follows:

One of Icies' regular customers asked the company to fill a special order of 500 quarts at a selling price of $2.25 per quart for a special picnic. The order could be filled with Icies' capacity without affecting total fixed costs for the month. Icies' general manager was concerned about selling ice cream below the cost of $2.75 per quart and has asked for your advice.

Required:

a. Prepare a schedule to show the impact on Icies' profits of providing 500 quarts of ice cream in addition to the regular production and sales of 50,000 quarts per month.

b. Based solely on the data given, what is the lowest price per quart at which the ice cream could be sold without reducing Icies' profits?

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Materials Labor Variable overhead Fixed overhead ($50,000 per month, 50,000 $1.00 .50 .25 882 quarts per month) 1.00 Total cost per quart $2.75