Exercise 4 34 Pricing Decisions (LO 4 1, 2) Assume that Cold Rock sells ice cream for $3 20 per gallon The cost of each gallon follows Materials $ 70 Labor 70 Variable overhead 20 Fixed overhead ($18,810 per month, 20,900 gallons per month) 90 Total cost per gallon $ 2 50 One of Cold Rock's regular customers asked the company to fill a special order of 900 gallons at a selling price of $2 30 per gallon for a fund raising picnic for a local charity Cold Rock has capacity to fill it without affecting total fixed costs for the month Cold Rock's general manager was concerned about selling the ice cream below the cost of $2 50 per gallon and has asked for your advice Required a Prepare a schedule to show the impact on Cold Rock's profits of providing 900 gallons of ice cream in addition to the regular production and sales of 20,900 gallons per month b Based solely on the data given, what is the lowest price per gallon at which the ice cream in the special order could be sold without reducing Cold Rock's profits (Enter your answer in dollars and cents ) c If Cold Rock was operating at capacity, what would happen to operating profit if the special order was accepted Increase Decrease No change

Question

Exercise 4 34 Pricing Decisions (LO 4 1, 2) Assume that Cold Rock sells ice cream for $3 20 per gallon  The cost of each gallon follows  Materials $  70 Labor  70 Variable overhead  20 Fixed overhead ($18,810 per month, 20,900 gallons per month)  90 Total cost per gallon $ 2 50 One of Cold Rock's regular customers asked the company to fill a special order of 900 gallons at a selling price of $2 30 per gallon for a fund raising picnic for a local charity  Cold Rock has capacity to fill it without affecting total fixed costs for the month  Cold Rock's general manager was concerned about selling the ice cream below the cost of $2 50 per gallon and has asked for your advice  Required  a  Prepare a schedule to show the impact on Cold Rock's profits of providing 900 gallons of ice cream in addition to the regular production and sales of 20,900 gallons per month  b  Based solely on the data given, what is the lowest price per gallon at which the ice cream in the special order could be sold without reducing Cold Rock's profits  (Enter your answer in dollars and cents ) c  If Cold Rock was operating at capacity, what would happen to operating profit if the special order was accepted  Increase Decrease No change

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Question

Exercise 4-34 Pricing Decisions (LO 4-1, 2) Assume that Cold Rock sells ice cream for $3.20 per gallon. The cost of each gallon follows: Materials

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Materials	$	.70
Labor		.70
Variable overhead		.20
Fixed overhead ($18,810 per month, 20,900 gallons per month)		.90

Total cost per gallon	$	2.50

Required:
a.	Prepare a schedule to show the impact on Cold Rock's profits of providing 900 gallons of ice cream in addition to the regular production and sales of 20,900 gallons per month.

b.	Based solely on the data given, what is the lowest price per gallon at which the ice cream in the special order could be sold without reducing Cold Rock's profits? (Enter your answer in dollars and cents.)