jeans and T-shirts. Management is considering 4. Burke\'s corner currently sells

Question

jeans and T-shirts. Management is considering 4. Burke's corner currently sells adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $49 each with expected sales of 3,600 tops annually. By adding the fleece tops management feels the firm will sell an additional 220 pairs of jeans at $59 a pair and 350 fewer T-shirts at $18 each. The variable cost per unit is $36 on the jeans, $9 on the -shirts, and $21 on the fleece tops. With the new item, the depreciation ex $41,000 a year and the fixed costs are $62,000 annually. The tax rate is 34 perce is the project's operating cash flow? nt. What

Explanation / Answer

Calculation of project's operating cash flow Tops Jeans T-shirts Total Sales $176,400.00 $12,980.00 $6,300.00 $195,680.00 Less : Variable cost $75,600.00 $7,920.00 $3,150.00 $86,670.00 Contribution Margin $100,800.00 $5,060.00 $3,150.00 $109,010.00 Less : Fixed Cost $62,000.00 Less : Depreciation $41,000.00 Net Operating Income $6,010.00 Less : Tax @ 34% $2,043.40 Add : Depreciation $41,000.00 Project's Operating Cash flow $44,966.60

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