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On April 1 , the federal government offers MCS a contract to supply 2 , 0 0 0 radios to military bases for a June
On April the federal government offers MCS a contract to supply radios to military bases for a June delivery. Because of an unusually large number of rush orders from its regular customers, MCS plans to produce units during the second quarter, which for MCS runs from April through June This level of production will use all available capacity for the quarter. If it accepts the government order, MCS would lose units normally sold to regular customers to a competitor. The government contract would reimburse its share of quarterly manufacturing costs plus pay a $ fixed fee profitNo variable marketing costs would be incurred on the governments units. What impact would accepting the government contract have on second quarter income? Hint: Part of the question is to figure out the meaning of share of quarterly manufacturing costs.Select option "increase" or "decrease", keeping without government contract as the base. Select "none" if there is no effect.Medbury Communications Systems MCS produces mobile radios for arctic and other harsh environments. The costs to manufacture and market the radios at the companys normal quarterly volume of units are shown in the following table:
Unit manufacturing costs
Materials variable $
Labor variable
Overhead variable portion
Overhead fixed portion
Total unit manufacturing costs $
Unit marketing costs
Variable
Fixed
Total unit marketing costs
Total unit costs $
Required:
Assume that no connection exists among the situations described in each question below unless otherwise stated. Each is independent. Also assume a regular selling price of $ per unit unless otherwise stated. Ignore income taxes and other costs that are not mentioned in the accompanying table or in the question itself.
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