(Proforma income) Sara Tucker, president of Westcoast Bungee Cords, is con¬ sidering buying a new piece of equipment for her plant. This piece of equipment will increase her fixed overhead by $300,000 per year, but reduce her variable expenses per unit of production by 3 5 percent. Budgeted sales of bungee cords for 1998 are 120,000 feet at an average selling price of $25 per foot. Variable expenses are currently 75 percent of selling price and bxed costs total $400,000 per year. Assuming that Sara acquires the new piece of equipment, answer the following questions.

a. What is the projected variable cost per foot of cord?

b. What are the projected bxed costs per year?

c. What is the expected operating profit if actual sales are equal to budgeted sales?

d. Should Sara acquire the equipment?LO1