Question

The projections for a new one-year project show sales of 8,500 units, ± 5 percent; variable costs per unit of $28.62, ± 3 percent; and fixed costs of $164,000, ± 3 percent. Depreciation is $62,000 and the tax rate is 23 percent. The sale price is $55 a unit, ± 2 percent. The company bases its sensitivity analysis on the expected scenario. What is the operating cash flow for a sensitivity analysis using total fixed costs of $170,000?

Answer 1

Answer:

Operating cash flow $56,017.10

Explanation:

The computation of the operating cash flow is shown below:

Sales (8,500 × $55) $467,500

Less: Variable cost (8,500 × 28.62) -$243,270

Fixed costs -$170,000  

Depreciation -$62,000

Income before tax -$7,770

Less: Tax -1,787.10

Net Income -$5,982.9

Add: Depreciation  62,000

Operating cash flow $56,017.10