The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 106,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows:

Direct materials	$	32.60
Direct labor	$	24.20
Variable manufacturing overhead	$	18.40
Fixed manufacturing overhead	$	23.00
Variable selling expense	$	15.60
Fixed selling expense	$	9.80

The regular selling price of one unit of Product C is $145.60. A special order has been received by Melrose from Moore Corporation to purchase 7,000 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. 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 on each unit of product C in the special order. The machine will cost $10,500 and will have no use after the special order is filled. Assume that direct labor is a variable cost. Assume Melrose expects to sell 96,000 units of Product C to regular customers next year. If Moore company offers to buy the 7,000 special units at $135.60 per unit, the effect of accepting the special order on Melrose's net operating income for next year will be:

rev: 11_01_2016_QC_CS-68232

$102,900 increase

$114,900 decrease

$165,900 increase

$385,000 increase