Byrne Corporation generated sales of 1500 bicycles at a selling price of $1000 each.The fixed costs are $800 000 and variable costs per unit are $30.The annual depreciation of the machinery is $150 000.Calculate the annual operating cash flow if the corporate tax rate is 30%.

Question

Quizplus · Accepted Answer

The correct answer is A because the annual operating cash flow is calculated as follows:Sales revenue = 1500 bicycles * $1000 per bicycle = $1,500,000Variable costs = 1500 bicycles * $30 per bicycle = $45,000Depreciation = $150,000Fixed costs = $800,000Earnings before interest and taxes (EBIT) = $1,500,000 - $45,000 - $150,000 - $800,000 = $505,000Taxes (30%) = $505,000 * 0.30 = $151,500Net income = $505,000 - $151,500 = $353,500Operating cash flow = Net income + Depreciation = $353,500 + $150,000 = $503,500

Byrne Corporation Generated Sales of 1500 Bicycles at a Selling