(Answered) Problemvictory company makes a special kind of racing tire

Accounting

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

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