How will operating income be affected If Mickey decides

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Problem 1: Mickey Tire Company makes a special kind of racing tire. Variable costs are $260 per unit, and fixed costs are $35,000 per month. Mickey sells 700 units per month at a sales price of $345. If the quality of the tire is upgraded, the company believes it can increase the sales price to $380. If so, the variable cost will increase to $280 per unit, and the fixed costs will rise by 30%. If Mickey decides to upgrade, how will operating income be affected?

A. Operating income will increase by $14,000.
B. Operating income will decrease by $14,000.
C. Operating income will decrease by $10,500.
D. Operating income will remain the same.

Reference no: EM132946280

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