Brown Company produce a single product. The cost of producing and selling a single unit of this product is as follows:

Direct materials $5.00

Direct labor 4.00

Variable manufacturing overhead 1.00

Fixed manufacturing overhead 4.20

Variable selling and administrative expense .75

Fixed selling and administrative expense 2.00

The normal selling price is $23 per unit. The companys capacity is 60,000 units and is now operating at a capacity of 56,500 units. An order has been received for 5,000 units at a special price of $15 per unit.

Required:

1. If the order is accepted, by how much will annual profits be increased or decreased?
2. Assume the company has 500 units of this product left over from last year that are vastly inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost figure is relevant for establishing a minimum selling price for these units?