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aev [14]
3 years ago
10

The Rogers Corporation has a gross profit of $704,000 and $333,000 in depreciation expense. The Evans Corporation also has $704,

000 in gross profit, with $49,300 in depreciation expense. Selling and administrative expense is $191,000 for each company.
a. Given that the tax rate is 40 percent, compute the cash flow for both companies.

Cash Flow Rogers=
Cash Flow Evans=

b. Calculate the difference in cash flow between the two firms.
Business
1 answer:
Reil [10]3 years ago
5 0

Answer:

a. Cash Flow Rogers =  $441,000

Cash Flow Evans = $327,520

b. $113,480

Explanation:

The computation of the cash flow for both companies are shown below:

a. For Cash Flow Rogers

= Gross profit - Selling and administrative expense - income tax expense + depreciation expense × tax rate

where,  

Income tax expense = (Gross profit - Selling and administrative expense) × income tax rate  

= ($704,000 - $191,000) × 40%  

= $205,200

And, the other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

= $704,000 - $191,000 - $205,200 + $333,000 × 40%

= $307,800 + $133,200

= $441,000

For Cash Flow Evans

= Gross profit - Selling and administrative expense - income tax expense + depreciation expense × tax rate

where,  

Income tax expense = (Gross profit - Selling and administrative expense) × income tax rate  

= ($704,000 - $191,000) × 40%  

= $205,200

And, the other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

= $704,000 - $191,000 - $205,200 + $49,300 × 40%

= $307,800 + $19,720

= $327,520

b. The computation of the difference in cash flow between the two firms are shown below:

= Cash Flow Rogers - Cash Flow Evans

= $441,000 -  $327,520

= $113,480

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Answer:

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  • b<em>. Price</em>: <u>$1.51 per pen</u>

Explanation:

1. Break-even quantity

<u>a) Revenue, R(x)</u>

The  monthly revenue is the product of the price by the number of units sold in the month.

Naming x the number of pens sold in the month:

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The monthly cost is the sum of the fixed cost per month plus the variable costs:

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Break-even is the point when the revenue and the total costs are equal, this is, when the profit is zero. Write the equation and solve:

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Hence, the break-even quantity is 28,000 pens.

2. Price pens must be sold to obtain a monthly profit of $18,000

Profit = Revenue - Total cost

  • P(x) = R(x) - C(x)

  • P(x) = x.p - [ 0.25x + 21,000]

Where p is the price.

  • P(x) = x.p - 0.25x - 21,000

Substitute the quantity demanded, x, with 31,000, and the profit, P(x) with 18,000:

  • 18,000 = 31,000p - 0.25(31,000) - 21,000

Solve for p and compute:

  • 31,000p = 18,000 + 7,750 + 21,000

  • 31,000 p = 46,750

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<h3>What is a categorical data?</h3>

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Variable factory overhead                 $60,000

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