Question $4(15$ points$)$

Queeny Inc. produces a single product. The cost of producing and selling a single unit of this

product at the company's normal activity level of $60,000$ units per year is as follows:

The normal selling price is $$25$ per unit. The company's capacity is $75,000$ units per year.

An order has been received from a mail$-$order house for $15,000$ units at a special price of $$16$

per unit. This order would not affect regular sales.

Required:

a$.$ If the order is accepted, by how much will annual profits be increased or

decreased? $($The order will not change the company's total fixed costs.$)$

b$.$ How will your answer change if the order from the mail$-$order house is for $20,000$

units? $($Computations are not required to answer this question.$)$

c$.$ Assume the company has $1,000$ 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? Explain your answer.