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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.

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