Question: Refer to the data in Problem Estimate the cash from

Refer to the data in Problem. Estimate the cash from operations expected in year 2.
In Problem, Cameron Parts has the following data from year 1 operations, which are to be used for developing year 2 budget estimates:
Sales revenue (12,500 units). . . . . . . . $1,119,000
Manufacturing costs
Materials . . . . . . . . . . . . . . . . . . . . . $ 199,500
Variable cash costs . . . . . . . . . . . . . 271,350
Fixed cash costs . . . . . . . . . . . . . . . 108,000
Depreciation (fixed) . . . . . . . . . . . . 133,500
Marketing and administrative costs
Marketing (variable, cash) . . . . . . . . 142,500
Marketing depreciation . . . . . . . . . . 33,900
Administrative (fixed, cash) . . . . . . . 135,165
Administrative depreciation . . . . . . . $ 12,600
Total costs . . . . . . . . . . . . . . . . . . $1,036,515
Operating profits . . . . . . . . . . . . . . . . . $ 82,485
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $14,550 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $21,000. Sales volume and prices are expected to increase by 12 percent and 6 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 10 percent and variable manufacturing costs will decrease by 4 percent. Fixed manufacturing costs are expected to decrease by 7 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 8 percent. Inventories are kept at zero. Cameron operates on a cash basis.




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  • CreatedDecember 18, 2013
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