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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 1, the federal government offers MCS a contract to supply 2,000 radios to military bases for a June 30 delivery. Because of an unusually large number of rush orders from its regular customers, MCS plans to produce 16,000 units during the second quarter, which for MCS runs from April 1 through June 30. This level of production will use all available capacity for the quarter. If it accepts the government order, MCS would lose 2,000 units normally sold to regular customers to a competitor. The government contract would reimburse its share of quarterly manufacturing costs plus pay a $90,000 fixed fee (profit).(No 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 12,000 units are shown in the following table:
Unit manufacturing costs
Materials (variable) $ 80
Labor (variable)120
Overhead (variable portion)40
Overhead (fixed portion)96
Total unit manufacturing costs $ 336
Unit marketing costs
Variable 40
Fixed 112
Total unit marketing costs 152
Total unit costs $ 488
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 $600 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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