Merrimack Tire Company makes a special kind of racing tire. Variable costs are $ 200...
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Merrimack Tire Company makes a special kind of racing tire. Variable costs are $ 200 per unit, and fixed costs are $ 40 comma 000 per month. Merrimack sells 600 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 $ 240 per unit, and the fixed costs will rise by 50%. If Merrimack decides to upgrade, how will operating income be affected. Operating income will decrease by $ 18 comma 000. B. Operating income will increase by $ 50. C. Operating income will increase by $ 18 comma 000. D. Operating income will decrease by $ 26 comma 000.
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