Question

Go Fly A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $12.60 and the large kites would be $25.60. The variable cost per unit is $6.10 and $13.20, respectively. Jill, the owner, feels that she can sell 3,650 of the small kites and 2,015 of the large kites each year. The fixed costs would be $2,120 a year and the depreciation expense is $1,950. The tax rate is 34 percent. What is the annual operating cash flow

Answer 1

Answer:

Operating cash flow= $31,413.06

Explanation:

Giving the following information:

Small kites:

Selling price= $12.6

Unitary variable cost= $6.10

Sales= 3,650 units

Large kites:

Selling price= $25.6

Unitary variable cost= $13.2

Sales= 2,015 units

The fixed costs would be $2,120 a year and the depreciation expense is $1,950. The tax rate is 34 percent.

Sales= (3,650*12.6 + 2,015*25.6)= 97,574

Variable cost= (3,650*6.1 + 2,015*13.2)= (48,863)

Contribution margin= 48,711

Fixed costs= (2,120)

Depreciation= (1,950)

EBIT= 44,641

Tax= (44,641*0.34)= (15,177.94)

Depreciation= 1,950

Operating cash flow= $31,413.06