Determine Cash FlowsMarigold Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generateadditional annual sales of 9,300 units at $48 each. The new manufacturing equipment will cost $181,300 and is expected to have a 10-year lifeand $13,900 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture theproduct includes the following on a per-unit basis:Direct labor$8.20Direct materials26.70Fixed factory overhead-depreciation1.80Variable factory overhead4.10Total$40.80Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project. Use a minus sign to indicate cashoutflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.Marigold Inc.Net Cash Flows Net Cash FlowsYear 1Years 2-9Last YearInitial investment$4Operating cash flows:Annual revenuesSelling expensesCost to manufactureNet operating cash flowsTotal for Year 1$4Total for Years 2-9Residual valueTotal for last year

Annual Revenue = $446,400(9300 units *$48) Selling expenses = $22,320 (5% *446,400) Cost to…

hanuracturing equipment to make a new garden tool. The gar $48 each. The new manufacturing equipment will cost $181,30 nses related to the new product are expected to be 5% of sales nit basis: 58.20 26.70 1.80 4.10 10.80

hanuracturing equipment to make a new garden tool. The gar $48 each. The new manufacturing equipment will cost $181,30 nses related to the new product are expected to be 5% of sales nit basis: 58.20 26.70 1.80 4.10 10.80

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 4E: Determine cash flows Natural Foods Inc. is planning to invest in new manufacturing equipment to make...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Determine Cash Flows
Marigold Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate
additional annual sales of 9,300 units at $48 each. The new manufacturing equipment will cost $181,300 and is expected to have a 10-year life
and $13,900 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the
product includes the following on a per-unit basis:
Direct labor
$8.20
Direct materials
26.70
Fixed factory overhead-depreciation
1.80
Variable factory overhead
4.10
Total
$40.80
Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project. Use a minus sign to indicate cash
outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.
Marigold Inc.
Net Cash Flows

Net Cash Flows
Year 1
Years 2-9
Last Year
Initial investment
$4
Operating cash flows:
Annual revenues
Selling expenses
Cost to manufacture
Net operating cash flows
Total for Year 1
$4
Total for Years 2-9
Residual value
Total for last year

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