The Ethan Corporation sells 200,000 V262 valves to the automobile and truck industry. Ethan has a capacity of 120,000 machine-hours and can produce two valves per machine-hour. V262's contribution margin per unit is $9. Ethan sells only 200,000 valves because 40,000 valves (20% of the good valves) need to be reworked. It takes one machine-hour to rework two valves, so 20,000 hours of capacity are used in the rework process. Ethan's rework costs are $320,000. Rework costs consist of the following:

Direct materials and direct rework labor (variable costs): $2 per unit

Fixed costs of equipment, rent, and overhead allocation: $6 per unit

Ethan's process designers have developed a modification that would maintain the speed of the process and ensure 100% quality and no rework. The new process would cost $424,000 per year. The following additional information is available:

The demand for Ethan's V262 valves is 270,000 per year.

The Colton Corporation has asked Ethan to supply 26,000 T971 valves (another product) if Ethan implements the new design. The contribution margin per T971 valve is $9. Ethan can make one T971 valve per machine-hour with 100% quality and no rework.

1.	Suppose Ethan's designers implement the new design. Should Ethan accept Colton's order for 26,000 T971 valves? Show your calculations.
2.	Should Ethan implement the new design? Show your calculations.
3.	What nonfinancial and qualitative factors should Ethan consider in deciding whether to implement the new design?