search ebook g0 |jump to pg | go I book contents e cel 4.52. Comprehensive Differential Costing Problem 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 $50 75 25 60 Variable labor Fixed overhead.. S210 Total unit manufacturing costs Unit marketing costs 25 70 Total unit marketing costs . . . . 95 $305 . . . . . . 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 $370 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 imitations if the price were cut from $370 to $325 per unit Assuming that the cost behavior patterms implied by the data in the table are correct, would you recommend taking this action? What would be the impact on monthly sales, costs, and income? b On March 1, the federal government offers Davis a contract to supply 1,000 units to miltary 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 govemment 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 $50,000 fixed fee (profit). (No variable marketing costs would be units.) What impact would accepting the government contract have