Gardeneer Inc. is planning to invest $184,000 in a new garden tool that is expected to generate
Question:
Gardeneer Inc. is planning to invest $184,000 in a new garden tool that is expected to generate additional sales of 7,500 units at $38 each. The $184,000 investment includes $54,000 for initial launch-related expenses and $130,000 for equipment that has a 10-year life and a $17,500 residual value. Selling expenses related to the new product are expected to be 6% of sales revenue. The cost to manufacture the product includes the following per-unit costs:
Direct labor ........... $ 6.00
Direct materials .......... 11.75
Fixed factory overhead—depreciation . 1.50
Variable factory overhead ...... 1.80
Total ............... $21.05
Determine the net cash flows for the first year of the project, years 2–9, and for the last year of the project
Step by Step Answer:
Accounting
ISBN: 978-0324401844
22nd Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac