Blake Company manufactures a product with the following costs per unit at the expected production level of 60000 units:

Direct materials $13.00 Direct labor $22.00 Variable manufacturing overhead. $9.00

Fixed manufacturing overhead $7.00

The company has the capacity to produce 65000 units. The product regularly sells for $50.

32 Refer to the Figure above. A wholesaler has offered to pay $46 a unit for 12000 units. If the special order is accepted, the effect on operating income would be a

1. A decrease by $48000

2. B decrease by $18000

3. C decrease by $0

4. D decrease by $22000