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Mickey Tire Company makes a special kind of racing tire. Variable costs are $230 per unit, and fixed costs are $20,000 per month. Mickey sells
Mickey Tire Company makes a special kind of racing tire. Variable costs are $230 per unit, and fixed costs are $20,000 per month. Mickey sells 300 units per month at a sales price of $350. 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 $250 per unit, and the fixed costs will rise by 15%. If Mickey decides to upgrade, how will operating income be affected?
A) | Operating income will increase by $6000. |
B) | Operating income will decrease by $3000. |
C) | Operating income will decrease by $6000. |
D) | Operating income will remain the same. |
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