1. 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?
2. 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.