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How will operating income be affected

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Question - 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: EM133034641

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