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. it afacturing costs Variable materials Variable labor Variable overhead Pied overhead Total unit manufacturing costs Unit marketing coats Variable Total unit marketing costs Total unit costs 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 $400 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 $400 to $355 per unit. Assuming that the cost behavior patterns implied by the data in the table are correct --1. What would be the impact on monthly sales, costs, and income? -2. Would you recommend taking this action? b. 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 $55,000 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? c. Davis has an opportunity to enter a highly competitive foreign market. An attraction of the foreign market is that its demand is greatest when the domestic market's demand is quite low, thus, idle production facilities could be used without affecting domestic business. An order for 2,000 units is being sought at a below-normal price to enter this market. For this order, shipping costs will total 335 per un total (marketing costs to obtain the contract will be $4,000. No other variable marketing costs would be required on this Check my work Reg A1 Req AZ ReoB Reac ReqD ReqE1 Req E2 Reg F1 ReqF2 Market research estimates that volume could be increased to 7,000 units, which is well within production capacity limitations Ir the price were cut from $400 to $355 per unit. Assuming that the cost behavior patterns Implied by the data in the table are correct. Al. 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.) Show less 1 Sales price Quantity Revenue Wariable manufacturing costs variable marketing costs Contribution margin Fixed manufacturing costs bed marketing costs come Before Price Reduction 400 6 ,000 $ 2,400,000 810,000 120,000 1,470,000 330,000$ 390,0001 $ 750,000 After Price Reduction $ 355 7,000 $ 2,485,000 810,000 120,000 1,400,000 330,000 390,000 $ 680,000 | Req A2 > Req A1 Req A2 RegB ReqC Reg D Req E1 Req E2 Req F1 Reg F2 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 $55,000 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.) Show less Without Government Contract Impact With Government Contract Regular Government Total Revenue Variable manufacturing costs Variable marketing costs Contribution margin Fixed manufacturing costs Fored marketing costs Income MacBook Air modified stoves were produced. What in-house unit cost should be used to compare with the quration received From the outside contractor? Assume the payment to the outside contractor is $210. 1-2. Should the proposal be accepted for a price of $210 per unit to the outside contractor Complete this question by entering your answers in the tabs below. Reg A1 Req A2 ReqB ReqC ReqD Req1 Reg 2 Reg F1 Reg 2 A proposal is received from an outside contractor who will make and ship 2,000 stoves per month directly to Davis's customers as orders are received from Davis's sales force. Davis's fixed marketing costs would be unaffected, but its variable marketing costs would be cut by 15 percent for these 2,000 units produced by the contractor. Davis's plant would operate at two-thirds of its normal level, and total fixed manufacturing costs would be cut by 30 percent. What in-house unit cost should be used to compare with the quotation received from the supplier? Assume the payment to the outside contractor is $210. (Round your answer to 2 decimal places.) Show less In-house cost savings per unit RegD Reg 2 > MacBook Air Complete this question by entering your answers in the tabs below. Reg A1 Req A2 Reqs ReqC Reg D Red El Req E2 Reg F1 Reg 2 A proposal is received from an outside contractor who will make and ship 2,000 stoves per month directly to Davis's customers as orders are received from Davis's sales force. Davis's fixed marketing costs would be unaffected, but its variable marketing costs would be cut by 15 percent for these 2,000 units produced by the contractor. The idle facilities would be used to produce 1,600 modified stoves per month for use in extreme climates. These modified stoves could be sold for $445 each, while the costs of production would be $270 per unit variable manufacturing expense. Variable marketing costs would be $45 per unit. Fixed marketing and manufacturing costs would be unchanged whether the original 6,000 regular stoves were manufactured or the mix of 4,000 regular stoves plus 1,600 modified stoves were produced. What in-house unit cost should be used to compare with the quotation received from the outside contractor? Assume the payment to the outside contractor is $210. (Round your answer to 2 decimal places.) Show less In-house cost savings per unit ( ReqE2 Reg 2 > MacBook Air