Question

Ranger Corporation is currently selling widgets for $40 at a cost of $20 per unit. Fixed costs are currently $500 and the current production is 100 widgets. What is the Operating Cash Flow at this output level

Answer 1

The Operating Cash Flow for Ranger Corporation at the current output level of 100 widgets is $1,500, calculated by subtracting the total variable costs and fixed costs from the total revenue.

Step-by-step explanation:

To calculate the Operating Cash Flow (OCF) for Ranger Corporation at the current output level, we need to look at the company's revenues, variable costs, and fixed costs. The company sells widgets for $40 each and incurs a variable cost of $20 per unit. With a production level of 100 widgets, the total revenue would be 100 units × $40/unit = $4,000. The total variable cost would be 100 units × $20/unit = $2,000. The fixed costs are given as $500.

The OCF can be calculated using the formula OCF = Total Revenue - (Variable Costs + Fixed Costs). Plugging in the numbers, OCF = $4,000 - ($2,000 + $500) = $4,000 - $2,500 = $1,500. Therefore, the Operating Cash Flow at the current output level of 100 widgets is $1,500.

Answer 2

Answer: $2000

Step-by-step explanation:

From the question, we are informed that Ranger Corporation is currently selling widgets for $40 at a cost of $20 per unit and that the fixed costs are currently $500 and the current production is 100 widgets.

The Operating Cash Flow at this output level will be:

= (P - V) × Q

where p = selling price = $40

v = cost price = $20

q = quantity = 100

= ($40 - $20) × 100

= $20 × 100

= $2000