The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 70,000 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	$20
Direct labor	$17
Variable manufacturing overhead	$13
Fixed manufacturing overhead	$14
Variable selling expense	$12
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 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 60,000 units of Product C to regular customers next year. If Moore company offers to buy the 7,000 special units at $90 per unit, the effect of accepting the special order on Melrose's net operating income for next year will be:

$42,000 increase

$54,000 decrease

$105,000 increase

$248,500 increase