Fillip Corp. makes 3,800 units of part U1 each year. The unit costs of producing the part at 3,800 units per year are as follows:

Direct materials	$6.10
Direct labor	$4.50
Variable manufacturing overhead	$6.80
Supervisors salary	$2.50
Depreciation of special equipment	$8.60
Allocated general overhead	$7.00

An outside supplier has offered to sell the part to the company for $19.00 each. If this offer is accepted and so Fillip stops making part U1, then: the supervisor's salary and all of the variable costs would be avoided, the allocated general overhead costs would not be avoided, and the depreciation expense of the special equipment used to make the part will not be avoided. If the company buys part U1 from the supplier (instead of continuing to make the part), what would be the impact on the company's net operating income?

Net operating income would decrease by $3,420.

Net operating income would increase by $62,700

Net operating income would decrease by $62,700

Net operating income would increase by $3,420.