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Calculate cash flows Nature’s Way 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 1,600 units at $75 each. The new manufacturing equipment will cost $257,000 and is expected to have a 10-year life and $17,000 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 $12.00 Direct materials 30.00 Fixed factory overhead—depreciation 15.00 Variable factory overhead 4.50 Total $61.50 Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 26, Problem 26.4EX
Textbook Problem

Calculate cash flows

 Nature’s Way 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 1,600 units at $75 each. The new manufacturing equipment will cost $257,000 and is expected to have a 10-year life and $17,000 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 $12.00
Direct materials 30.00
Fixed factory overhead—depreciation 15.00
Variable factory overhead 4.50
Total $61.50

 Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project.

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Chapter 26 Solutions

Accounting
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