Wing Company makes a special kind of racing tire

Variable costs are $320, and fixed costs are $35,500 per month. Wing sells 600 units per month at a sales price of $410. If Wing upgrades the quality of the tire, management believes that the sales price can be increased to $470. If so, the variable cost will increase to $350, and the fixed costs will rise by 30%. The CEO wishes to increase his operating income by 21%. If the company decides to upgrade the product, the CEO will reach his goal.
Indicate whether the statement is true or false


FALSE .Upgrade Do Not Upgrade
Sales Revenue $282,000 $246,000
Variable costs 210,000 192,000
Fixed costs 46,150 35,500
Operating income $25,850 $18,500

Increase in operating income [(25,850 -18,500 ) / 18,500] x 100 = 39.7%

Business

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