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.

Question

Quizplus · Accepted Answer

11ea86d6_82a3_39e3_92b6_9d996d649514_TB2804_00 Increase in operating income [(25,850 -18,500)/ 18,500] × 100 = 39.7%

Wing Company Makes a Special Kind of Racing Tire