Asian Cables Ltd. is manufacturing a special type of cable used by electricity undertakings. The company is currently working at the 80% capacity level. Data on annual sales and costs are as follows :

Rs. lakhs

Sales 1,200

Direct materials 560

Direct labour 240

Factory overheads (80% fixed) 180

Selling, distribution, and administration

Overheads (60% variable) 100

The company has just received an export order which requires utilization of 40% of the plant capacity. The order cannot be split and has to be executed in one lot as quickly as possible. The price offered is 10% lower than the current domestic price. Further, it will be necessary to spend 10% more on variable selling, distribution and administration costs because of the special type of export packing required. The company is considering the following options :

(a) reject the export order and carry on with the domestic sales

(b) accept the export order and allow the domestic sales to fall to the extent required

(c) create additional plant capacity by installing new machinery which will result in an increase of fixed costs by Rs. 20 lakhs p.a.

Evaluate each of these options and suggest the best course of action for the company