ardner Sail Makers manufactures sails for sailboats. The company has the capacity to produce36,000sails per year and is currently producing and selling 25,000sails per year. The following information relates to currentproduction:

Sales price per unit	$ 185
Variable costs perunit:
Manufacture	$ 60
Selling and administrative	$ 22
Total fixedcosts:
Manufacturing	$675,000
	$300,000

Assume that a special pricing order is accepted for 5,500sails at a sales price of $150per unit. This special order requires both variable manufacturing and variable selling and administrativecosts, as well as incremental fixed costs of$400,000. What will be the impact on operatingincome?

A.

Operating income increases by $374,000.

B.

Operating income decreases by $26,000.

C.

Operating income increases by$26,000.

D.

Operating income decreases by$374,000.