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.

Required:

a. Market research estimates that volume could be increased to 7,000 units, which is well within production capacity limitations if the price were cut from $408 to $363 per unit. Assuming that the cost behavior patterns implied by the data in the table are correct.

a-1. What would be the impact on monthly sales, costs, and income?

Market research estimates that volume could be increased to 7,000 units, which is well within production capacity limitations if the price were cut from $408 to $363 per unit. Assuming that the cost behavior patterns implied by the data in the table are correct.

A1. What would be the impact on monthly sales, costs, and income? (Select option "increase" or "decrease", keeping before price reduction as the base. Select "none" if there is no effect.)

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	Before Price Reduction	After Price Reduction	Impact
Sales price	$408
Quantity
Revenue
Variable manufacturing costs
Variable marketing costs
Contribution margin
Fixed manufacturing costs
Fixed marketing costs
Income

• Req A1