A company produces 1000 packages of cat food per month. The sales price is $3.90 per pack. Variable cost is $1.60 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 $1.60 to $1.70 per unit, and fixed costs will increase by 20%. The company will price the new product at $7 per pack. How will this affect operating income?
A) Operating income will decrease by $2660 per month.
B) Operating income will remain unchanged.
C) Operating income will decrease by $1060 per month.
D) Operating income will increase by $2660 per month.
D) Operating income will increase by $2660 per month.
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