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Victory Tire Company makes a special kind of racing tire. Variable costs are $220 per unit, and fixed costs are $20,000 per month. Victory sells
Victory Tire Company makes a special kind of racing tire. Variable costs are $220 per unit, and fixed costs are $20,000 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 $325. 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?
A) | Operating income will decrease by $3000. |
B) | Operating income will decrease by $12,000. |
C) | Operating income will increase by $3000. |
D) | Operating income will increase by $12,000. |
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