The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 70,000 units of Produc

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The Melrose Corporation produces a single product, Product C.
Melrose has the capacity to produce 70,000 units of Product C each
year. The per unit costs to produce and sell one
unit of Product C to its regular
customers are as follows:
The regular selling price of one unit of Product C is $100. A
special order has been received by Melrose from Moore Corporation
to purchase 7,000 units of Product C at a special price of $58 per
unit. If this special order is accepted, the variable selling
expense on this special order will only be $3 per unit. Total fixed
manufacturing overhead and fixed selling expenses would be
unaffected, except that Melrose will need to purchase a specialized
machine to engrave the Moore name to the product in the special
order. The specialized machine will cost $10,500 and will have no
use after the special order is filled.
Melrose has enough production capacity to fill this special
order. If Melrose accepts this one-time-only special order, what
would be the impact on its net operating income?
Its net operating income would decrease by $14,000
Its net operating income would increase by $35,000
Its net operating income would increase by $24,500
Its net operating income would decrease by $168,000