Problem
Victory Company makes a special kind of racing tire. Variable costs are$220, and fixed costs are$30,000 per month. Victory sells 500 units per month at a price of$300. If Victory upgrades the quality of the tire, they believe that they can boost the price up to$325. If so, the variable cost will go up to$230 and the fixed costs will remain the same. If Victory decides to upgrade, how will it affect operating income?
A. Operating income will go down by $5,000
B. Operating income will go up by $12,500
C. Operating income will go up by $7,500
D. Operating income will go down by $1,250