Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,800 pairs of sunglasses at a price of $153 each and a variable cost of $105 each. The equipment necessary for the project will cost $305,000 and will be depreciated on a straight-line basis over the 5-year life of the project. Fixed costs are $190,000 per year and the tax rate is 40 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?

Multiple Choice

• $3,480

• $3,480

• $3,132

• $3,867

• $3,132