Hi-As-A-Kite is considering making and selling custom kites in two sizes. The sm

Question

Hi-As-A-Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $10 and the large kites would be $24. The variable cost per unit is $5 and $11, respectively. Jill, the owner, feels that she can sell 2,600 of the small kites and 1,700 of the large kites each year. The fixed costs would be only $2,100 a year and the tax rate is 34 percent. What is the annual operating cash flow if the annual depreciation expense is $900?

Explanation / Answer

Net income before tax = (10-5)*2600 + (24-11)*1700 -2100 - 900 = $ 32100

Tax Expenses = 32100*34% = $ 10914

Net Income after tax = 32100 - 10914 = $ 21186

The annual operating cash flow = Net Income after tax + depreciation

The annual operating cash flow = 21186 + 900

The annual operating cash flow = $ 22086

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.