Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,900 pairs of sunglasses at a price of $154 each and a variable cost of $106 each. The equipment necessary for the project will cost $310,000 and will be depreciated on a straight-line basis over the 6-year life of the project. Fixed costs are $200,000 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

• $4,327

• $3,505

• $3,894

• $3,505

• $4,661