A company produces 1000 packages of chicken feed per month. The sales price is $7 per pack. Variable cost is $1.50 per unit, and fixed costs are $1700 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will increase from $1.50 to $2.00 per unit, but there will be no change in fixed costs. The company will price the new product at $4.30 to compete with other products. How will this affect operating income?
A) Operating income will decrease by $3200 per month.
B) Operating income will increase by $3200 per month.
C) Operating income will decrease by $1700 per month.
D) Operating income will remain unchanged.
A) Operating income will decrease by $3200 per month.
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