Mickey Tire Company Makes a Special Kind of Racing Tire

Mickey Tire Company makes a special kind of racing tire.Variable costs are $220 per unit,and fixed costs are $30,000 per month.Mickey sells 500 units per month at a sales price of $300.If the quality of the tire is upgraded,the company believes it can increase the sales price to $340.If so,the variable cost will increase to $230 per unit,and the fixed costs will rise by 50%.If Mickey decides to upgrade,how will operating income be affected?

A) Operating income will decrease by $15,000.
B) Operating income will decrease by $5000.
C) Operating income will increase by $5000.
D) Operating income will remain the same.