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:

Direct materials $20

Direct labor $17

Variable manufacturing overhead $13

Fixed manufacturing overhead $14

Variable selling expense $10

Fixed selling expense $8

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 $168,000

Its net operating income would increase by $24,500

Its net operating income would increase by $35,000

Its net operating income would decrease by $14,000