Question

ABC Co. is analyzing a proposed project with anticipated sales of 12,000 units, give or take 4 percent. The expected variable cost per unit is $7 and the expected fixed cost is $36,000. The cost estimates have a range of plus or minus 6 percent. The depreciation expense is $29,600. The tax rate is 34 percent. The sale price is estimated at $14.99 a unit, give or take 1 percent. What is the operating cash flow under the best-case scenario?

	A.	$58,499.29
	B.	$58,235.78
	C.	$59,311.10
	D.	$56,208.01

Answer 1

Answer B) is correct as calculated below-

Sales units (12000*1.04)	12,480
Sales price (14.99*1.01)	$            15.14
Sales in $	$ 188,945.95
Variable cost-7*.94*12480	$    82,118.40
Contribution	$ 106,827.55
Fixed cost 36000*.94	$    33,840.00
Depreciation	$    29,600.00
Income before tax	$    43,387.55
Tax @34%	$    14,751.77
Net income	$    28,635.78
Depreciation	$    29,600.00
Operating cash flows	$    58,235.78