Question

The following information is available for year 1 for Pepper Products:

    

Sales revenue (200,000 units)	$	3,000,000
Manufacturing costs
Materials	$	168,000
Variable cash costs		142,400
Fixed cash costs		317,600
Depreciation (fixed)		989,000
Marketing and administrative costs
Marketing (variable, cash)		432,400
Marketing depreciation		149,600
Administrative (fixed, cash)		519,200
Administrative depreciation		74,800
Total costs	$	2,793,000
Operating profits	$	207,000

    
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 6 percent, but prices are expected to rise by 20 percent. Material costs per unit are expected to increase by 14 percent. Other unit variable manufacturing costs are expected to decrease by 9 percent per unit. Fixed cash costs are expected to increase by 5 percent.

  

Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 4 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.    

Required:

Estimate the cash from operations expected in year 2. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

Answer 1