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4-57. 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. 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 limitations if the price were cut from $370 to $325 per unit. Assuming that the cost behavior patterns 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 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 $50,000 fixed fee (profit). (No variable marketing costs would be incurred on the government's units.) What impact would accepting the government contract have on March income? (Part of your problem is to figure out the meaning of "share of March manufacturing costs.") 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