Martin Corporation, the maker of a variety of rubber products, is in the midst of a business downturn and has many idle

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Martin Corporation, the maker of a variety of rubber products,is in the midst of a business downturn and has many idlefacilities. Nationwide Tire Company has approached Martin toproduce 300,000 oversized tire tubes for $2.40 each.
Martin predicts that its variable costs will be $2.60 each. Itsfixed costs, which had been averaging $2.00 per unit on a varietyof products, will now be spread over twice as much volume. Thepresident commented, “Sure we will lose $.20 each on the variablecosts, but we will gain $1 per unit by spreading our fixed costsover more units. Therefore, we should take the offer because itwould gain us $.80 per unit.”
Martin currently has a volume of 300,000 units, sales of$1,200,000, variable costs of $780,000, and fixed costs of$600,000.
Required:a. Compute the impact on operating profit if the special order isaccepted.b. Based on your calculations, explain why you agree or do notagree with the president.c. Would it be beneficial for Martin to take a loss on this orderif it desires to enter this market? Briefly discuss.