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 2,400 units at $80 each. The new manufacturing equipment will cost $411,200 and is expected to have a 10-year life and $27,000 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 $19 Direct materials 48 Fixed factory overhead—depreciation 24 Variable factory overhead 7 Total $98 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. Marigold Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment Fill In The Blank Operating cash flows: Annual revenues Fill In The Blank Fill In The Blank Fill In The Blank Selling expenses Fill In The Blank Fill In The Blank Fill In The Blank Cost to manufacture Fill In The Blank Fill In The Blank Fill In The Blank Net operating cash flows Fill In The Blank Fill In The Blank Fill In The Blank Total for Year 1 Fill In The Blank Total for Years 2-9 Fill In The Blank Residual value Fill In The Blank Total for last year Fill In The Blank

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

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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 2,400 units at $80 each. The new manufacturing equipment will cost $411,200 and is expected to have a 10-year life and $27,000 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	$19
Direct materials	48
Fixed factory overhead—depreciation	24
Variable factory overhead	7
Total	$98

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.

Marigold Inc.
Net Cash Flows

	Year 1	Years 2-9	Last Year
Initial investment	Fill In The Blank
Operating cash flows:
Annual revenues	Fill In The Blank	Fill In The Blank	Fill In The Blank
Selling expenses	Fill In The Blank	Fill In The Blank	Fill In The Blank
Cost to manufacture	Fill In The Blank	Fill In The Blank	Fill In The Blank
Net operating cash flows	Fill In The Blank	Fill In The Blank	Fill In The Blank
Total for Year 1	Fill In The Blank
Total for Years 2-9		Fill In The Blank
Residual value			Fill In The Blank
Total for last year			Fill In The Blank

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