Stellar Plastics is analyzing a proposed project. The company expects to sell 11

Question

Stellar Plastics is analyzing a proposed project. The company expects to sell 11,000 units, give or take 4 percent. The expected variable cost per unit is $8.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $30,000. The tax rate is 34 percent. The sale price is estimated at $13.00 a unit, give or take 4 percent.
What is the operating cash flow for a sensitivity analysis using total fixed costs of $32,000?

Explanation / Answer

Pariculars Amount in $ Sales (11,000 units @ $13.00 per unit ) 1,43,000 less : Variable Cost (11,000 units @ $8.00 per unit ) 88,000 Total Contribution = 55,000 less : Fixed Cost 32,000 Profit = 23,000 Add : Depreciation 30,000 Total Actual Cash Flow 53,000

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