Maspion Company is a producer of protein powder, which is mainly purchased and used by fitness fanatics. Over 30 years, Maspion Company has developed a high quality and reputable product for its target market. Maspion packages its product in 5kg tins (referred to as units). The company's manufacturing facility has a capacity to produce 16,000 units per annum. Budgeted operating results for 20X6 are as follows:

Revenues (14,000 units @ $60) $840,000

Variable costs:

Manufacturing $350,000

Selling $112,000 $462,000

Contribution margin $378,000

Fixed costs:

Manufacturing $170,000

Selling and administrative $90,000 260,000

Operating income $118,000

A foreign wholesaler wants to buy 800 units at a price of $38 per unit. All fixed costs would remain within the relevant range. Variable selling costs on the special order would be the same as variable selling costs for regular orders.

Required:

(a) Determine the effect on operating income if the company produces the special order. Show all workings.

(b) Should the company produce the special order? Justify your response.

(c) Identify two qualitative factors that the company could consider in making the decision about whether to take on the special order. Discuss whether these factors would support or detract from a decision to undertake the special order.