Question

Go Fly A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $11.20 and the large kites would be $24.20. The variable cost per unit is $5.40 and $11.80, respectively. Jill, the owner, feels that she can sell 2,950 of the small kites and 1,805 of the large kites each year. The fixed costs would be $2,120 a year and the depreciation expense is $1,250. The tax rate is 35 percent. What is the annual operating cash flow?

Answer 1

Sales	$     76,721
($11.20*2950+$24.20*1805)
Less:
Variable Cost
($5.40*2950+$11.80*1805)	37229
Depreciation	$        1,250
Cost	$        2,120
Income Before Tax	$     36,122
Less:
Tax At 35%	$     12,643
Net Income	$     23,479
Add: Depreciation	$        1,250
Operating Cash Flow	$     24,729