Mickey Tire Company makes a special kind of racing tire. Variable costs are $220 per unit, and fixed costs are $30,000 per month. Mickey sells 500 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 $340. If so, the variable cost will increase to $230 per unit, and the fixed costs will rise by 50%. If Mickey decides to upgrade, how will operating income be affected?
A) Operating income will decrease by $15,000.
B) Operating income will decrease by $5000.
C) Operating income will increase by $5000.
D) Operating income will remain the same.
D) Operating income will remain the same.
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