Coconut Company produces and sells 40,000 bottles of coconut milk each year. The following information reflects a breakdown of its costs:

Cost Item	Costs per Bottle	Total Costs
Variable production costs	$10	$400,000
Fixed production costs	$7	$280,000
Variable selling costs	$4	$160,000
Fixed selling and administrative costs	$2	$80,000
Total costs	$23	$920,000

Coconut marks up its prices 35% over full costs. It has surplus capacity to produce 20,000 more bottles. A Dutch supermarket company has offered to purchase 12,000 bottles of the product at a special price of $26 per bottle. Coconut will incur additional shipping and selling costs of $1 per bottle to complete this order.

Required: (a) What will be the effect on Coconut's operating income if it accepts this order? (b) Analyze the effect on the company's overall contribution margin.