New Vine Vineyard produces premium wine. Its success in the industry is due to its quality, although all of its customers, wine shops and specialty grocery stores, are very cost conscious and negotiate for price cuts on all large orders. Noting that the wine industry is becoming increasingly competitive, New Vine is looking for a way to meet the challenge. It is negotiating with Pure Beverages, a regional specialty grocery store, to purchase a large order of wine. New Vine is currently producing at under-capacity and would like to keep its production facilities, gaining better economies of scale by increasing production. Pure Beverages has agreed to a large order but only at a price of $39 per bottle. The special order can be purchased in one batch with available capacity. New Vine prepared these data:

Next month's operating information (per unit, for 10,000 bottles, made in 10 batches of 1,000 each): No variable marketing costs are associated with this order, but New Vine has spent $2,500 during the past two months trying to get Pure Beverages to purchase the special order. 1. Should New Vine accept this special order? How much will the special order change New Vine's total operating income?

2. How does the existence of excess production capacity affect the decision to accept or reject this offer?