Supersonic Tire Company Makes a Special Kind of Racing Tire

Supersonic Tire Company makes a special kind of racing tire.Variable costs are $210 per unit,and fixed costs are $42,000 per month.Supersonic sells 400 units per month at a sales price of $320.If the quality of the tire is upgraded,the company believes it can increase the price to $350.If so,the variable cost will increase to $220 per unit,and the fixed costs will rise by 20%.If Supersonic decides to upgrade,how will operating income be affected?

A) Operating income will decrease by $12,000.
B) Operating income will decrease by $400.
C) Operating income will increase by $12,000.
D) Operating income will increase by $20.