Cathy and Tom’s Specialty Ice Cream Company operates a small
Cathy and Tom’s Specialty Ice Cream Company operates a small production facility for the local community. The facility has the capacity to make 18,000 gallons of the single flavor, GUI Chewy, annually. The plant has only two customers, Chuck’s Gas & Go and Marcee’s Drive & Chew DriveThru. Annual orders for Chuck’s total 9,000 gallons and annual orders for Marcee’s total 4,500 gallons. Variable manufacturing costs are $1 per gallon, and annual fixed manufacturing costs are $27,000.
What cost per gallon should the cost system report? Why? If you need more information to answer the question, describe it.