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Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its...

Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler-weather option. The tops would sell for $51 each with expected sales of 4,400 tops annually. By adding the fleece tops, management feels the firm will sell an additional 295 pairs of jeans at $63 a pair and 430 fewer T-shirts at $24 each. The variable cost per unit is $34 on the jeans, $14 on the T-shirts, and $29 on the fleece tops. With the new item, the depreciation expense is $31,000 a year and the fixed costs are $77,000 annually. The tax rate is 34 percent. What is the project's operating cash flow?

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Answer #1
Flee tops Jeans T-Shirts Total
Units 4400 295 430
Selling Price per unit ($) 51 63 24
Variable cost per unit ($) 29 34 14
Sales 224400 18585 10320 253,305
Variable cost 127600 10030 6020 143650
Fixed costs 77000
Depreciation expense 31000
Pre tax profit 1655
Tax rate @34% 562.7
After tax profit 1092.3
Add: Depreciation expense 31000
project's operating cash flow 32092.3
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