Question

A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $11.50 and the large kites would be $24.50. The variable cost per unit is $5.55 and $12.10, respectively. Jill, the owner, feels that she can sell 3,100 of the small kites and 1,850 of the large kites each year. The fixed costs would be $2,120 a year and the depreciation expense is $1,400. The tax rate is 35 percent. What is the annual operating cash flow

Answer 1

The annual operating cash flow of the Kite business is $35,742.50.

Step-by-step explanation:

To calculate the annual operating cash flow, we need to determine the total revenue and the total costs for both sizes of kites. The total revenue is calculated by multiplying the price per unit by the number of units sold. For the small kites, the total revenue would be $11.50 * 3,100 = $<<11.50*3100=35550>>35,550. For the large kites, the total revenue would be $24.50 * 1,850 = $<<24.50*1850=45325>>45,325.

The total costs are calculated by adding the fixed costs and the variable costs. The total costs for the small kites would be $2,120 (fixed costs) + ($5.55 (variable cost per unit) * 3,100 (number of units)) = $<<2120+(5.55*3100)=20775>>20,775. The total costs for the large kites would be $2,120 (fixed costs) + ($12.10 (variable cost per unit) * 1,850 (number of units)) = $<<2120+(12.10*1850)=24357.5>>24,357.50.

Now, we can calculate the annual operating cash flow by subtracting the total costs from the total revenue. The annual operating cash flow would be $35,550 (total revenue for small kites) + $45,325 (total revenue for large kites) - $20,775 (total costs for small kites) - $24,357.50 (total costs for large kites) = $35550 + $45325 - $20775 - $24357.50 = $<<35550+45325-20775-24357.5=35742.50>>35,742.50.