Davis Kitchen Supply produces stoves for commercial kitchens. The costs to manufacture and market the stoves at the company's normal volume of 6,000 units per month are shown in the following table.

Unit manufacturing costs
Variable materials	$	41
Variable labor		66
Variable overhead		16
Fixed overhead		51
Total unit manufacturing costs				$	174
Unit marketing costs
Variable		16
Fixed		61
Total unit marketing costs					77
Total unit costs				$	251

Unless otherwise stated, assume that no connection exists between the situation described in each question; each is independent. Unless otherwise stated, assume a regular selling price of $408 per unit. Ignore income taxes and other costs that are not mentioned in the table or in the question itself.

On March 1, the federal government offers Davis a contract to supply 1,000 units to military bases for a March 31 delivery. Because of an unusually large number of rush orders from its regular customers, Davis plans to produce 8,000 units during March, which will use all available capacity. If it accepts the government order, it would lose 1,000 units normally sold to regular customers to a competitor. The government contract would reimburse its "share of March manufacturing costs" plus pay a $59,000 fixed fee (profit). (No variable marketing costs would be incurred on the government's units.) Assuming that the government's "share of March manufacturing costs" will be the proportionate fixed manufacturing cost, what impact would accepting the government contract have on March income? (Select option "increase" or "decrease", keeping without government contract as the base. Select "none" if there is no effect.)

Davis Kitchen Supply produces stoves for commercial kitchens. The costs to manufacture and market the stoves at the company's normal volume of 6,000 units per month are shown in the following table.

Unit manufacturing costs
Variable materials	$	41
Variable labor		66
Variable overhead		16
Fixed overhead		51
Total unit manufacturing costs				$	174
Unit marketing costs
Variable		16
Fixed		61
Total unit marketing costs					77
Total unit costs				$	251

Unless otherwise stated, assume that no connection exists between the situation described in each question; each is independent. Unless otherwise stated, assume a regular selling price of $408 per unit. Ignore income taxes and other costs that are not mentioned in the table or in the question itself.

On March 1, the federal government offers Davis a contract to supply 1,000 units to military bases for a March 31 delivery. Because of an unusually large number of rush orders from its regular customers, Davis plans to produce 8,000 units during March, which will use all available capacity. If it accepts the government order, it would lose 1,000 units normally sold to regular customers to a competitor. The government contract would reimburse its "share of March manufacturing costs" plus pay a $59,000 fixed fee (profit). (No variable marketing costs would be incurred on the government's units.) Assuming that the government's "share of March manufacturing costs" will be the proportionate fixed manufacturing cost, what impact would accepting the government contract have on March income? (Select option "increase" or "decrease", keeping without government contract as the base. Select "none" if there is no effect.)

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	Without Government Contract	With Government Contract			Impact
		Regular	Government	Total
Revenue						decrease
Variable manufacturing costs						none
Variable marketing costs						decrease
Contribution margin						decrease
Fixed manufacturing costs						none
Fixed marketing costs						none
Income						decrease