Question

Go Fly A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $11.40 and the large kites would be $24.40. The variable cost per unit is $5.50 and $12.00, respectively. Jill, the owner, feels that she can sell 3,050 of the small kites and 1,835 of the large kites each year. The fixed costs would be $2,120 a year and the depreciation expense is $1,350. The tax rate is 34 percent. What is the annual operating cash flow

Answer 1

Operating cash flow= 10,936.5

Step-by-step explanation:

Giving the following information:

Selling price:

Small kites= $11.40

Large kites= $24.40

Variable cost per unit:

Small kites= $5.5

Large kites= $12

Sales in units:

Small kites= 3,050

Large kites= 1,835

The fixed costs would be $2,120 a year and the depreciation expense is $1,350. The tax rate is 34 percent.

Sales= (11.4*3,050) + (24.4*1,835)= 79,544

Total variable cost= (5.5*3,050) + (24.4*1,835)= (61,549)

Contribution margin= 17,995

Fixed costs= (2,120)

Depreciation= (1,350)

EBIT= 14,525

Tax= (14,525*0.34)= (4,938.5)

Depreciation= 1,350

Net operating cash flow= 10,936.5