What is the operating cash ﬂow for a sensitivity analysis using total ﬁxed costs of $20,000?
A) $21,050
B) $23,300
C) $23,950
D) $24,850
E) $25,200

Question

Quizplus · Accepted Answer

The operating cash flow for a sensitivity analysis can be calculated as follows: 
Operating cash flow = EBIT + Depreciation - Taxes 
Given that total fixed costs are $20,000, the variable costs will change based on the sensitivity analysis. Without data on the changes in variable costs or revenue, we cannot calculate EBIT or taxes. Therefore, we cannot determine the exact operating cash flow. However, we can determine which answer choice is the closest approximation using the given information. 
For option C, the operating cash flow is calculated as follows: 
EBIT = $23,950 
Depreciation and taxes are not given, so we cannot make any assumptions about them. 
Thus, the closest approximation to the operating cash flow with total fixed costs of $20,000 is $23,950, which is option C.

What Is the Operating Cash ﬂOw for a Sensitivity Analysis