Question

Go Fly A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $11.90 and the large kites would be $24.90. The variable cost per unit is $5.75 and $12.50, respectively. Jill, the owner, feels that she can sell 3,300 of the small kites and 1,910 of the large kites each year. The fixed costs would be $2,120 a year and the depreciation expense is $1,600. The tax rate is 40 percent. What is the annual operating cash flow

Answer 1

See below

Step-by-step explanation:

Given the above information,

Sales

= ($11.90 × 3,300) + ($24.9 × 1,910)

= $39,270 + $4,7559

= $86,829

Total variable cost

= ($5.75 × 3,300) + ($12.5 × 1,910)

= $18,975 + $23,875

= $42,950

Contribution margin = $43,979

Fixed cost = ($2,120)

Depreciation = ($1,600)

EBIT = $40,259

Tax = ($40,259 × 0.40) = $16,104

Depreciation = $1,600

Net operating cash flow = $22,555