Victory Company Makes a Special Kind of Racing Tire

Victory Company makes a special kind of racing tire. Variable costs are $220, and fixed costs are $30,000 per month. Victor sells 500 units per month at a price of $300. If Victory upgrades the quality of the tire, they believe they can boost the price up to $325. If so, the variable cost will go up to $230 and the fixed costs will rise by 40%. If Victory decides to upgrade, how will it affect operating income?

A) Operating income will go down by $1,250.
B) Operating income will go down by $4,500.
C) Operating income will go up by $12,500.
D) Operating income will go up by $7,500.