Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 6,300 pairs of sunglasses at a price of $158 each and a variable cost of $110 each. The equipment necessary for the project will cost $330,000 and will be depreciated on a straight-line basis over the 6-year life of the project. Fixed costs are $240,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?

Multiple Choice

$4,550

$3,686

$4,977

$3,686

$4,095