Question

Go Fly A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $12.70 and the large kites would be $25.70. The variable cost per unit is $6.15 and $13.30, respectively. Jill, the owner, feels that she can sell 3,700 of the small kites and 2,030 of the large kites each year. The fixed costs would be $2,120 a year and the depreciation expense is $2,000. The tax rate is 35 percent. What is the annual operating cash flow

Answer 1

Answer:

the annual operating cash flow is $31,437.

Explanation:

The Annual Operating Cash flow is calculated as follows :

Revenues :

Small kites (3,700 × $12.70)                                    $46,990

Large kite (2,030 × $25.70)                                      $52,171

Total Revenue                                                                                $99,161

Less Variable Expenses :

Small kites (3,700 × $6.15)                                     ($22,755)

Large kite (2,030 × $13.30)                                    ($26,999)   ($49,754)

Less Fixed Expenses                                                                   ($2,120)

Less depreciation expense                                                        ($2,000)

Operating Income before tax                                                     $45,287

Less Income tax expense ($45,287 × 35%)                              ($15,850)

Operating Income After tax                                                        $29,437

Add Back Depreciation Expense                                                 $2,000

Operating Cash flow                                                                    $31,437