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How will it affect operating income

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Question - Victory Tire Company makes a special kind of racing tire. Variable costs are $220 per unit, and fixed costs are $10,000 per month. Victory sells 600 units per month at a sales price of $300. If the quality of the tire is upgraded, the company believes it can increase the sales price to $350. If so, the variable cost will increase to $240 per unit, and the fixed costs will remain the same. If Victory decides to upgrade, how will it affect operating income?

Operating income will increase by $12,000.Operating income will increase by $18,000.Operating income will decrease by $12,000.Operating income will decrease by $18,000.

Reference no: EM133004318

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