Question

You are analyzing a project and have developed the following estimates: unit sales = 2,600, price per unit = $109, variable cost per unit = $67, fixed costs per year = $38,000. The depreciation is $12,000 a year and the tax rate is 34 percent. What effect would the sale of one more unit have on the operating cash flow?

Answer 1

Answer:

Effect on income= $27.72 increase

Explanation:

Giving the following information:

Selling price per unit = $109

variable cost per unit = $67

Tax rate is 34 percent.

To calculate the effect on income for one more unit sold, we need to use the following formula:

Effect on income= contribution margin*(1-t)

Effect on income= (109 - 67)*(0.66)

Effect on income= $27.72 increase