Merrimack Tire Company Makes a Special Kind of Racing Tire

Merrimack Tire Company makes a special kind of racing tire.Variable costs are $210 per unit,and fixed costs are $35,000 per month.Merrimack sells 400 units per month at a sales price of $310.If the quality of the tire is upgraded,the company believes it can increase the price to $330.If so,the variable cost will increase to $220 per unit,and the fixed costs will rise by 20%.If Merrimack decides to upgrade,how will operating income be affected?

A) Operating income will decrease by $8,000.
B) Operating income will decrease by $3,000.
C) Operating income will increase by $8,000.
D) Operating income will increase by $20.