Out of Eden, Inc. is planning to invest in new manufacturing equipment to make a new garden

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Out of Eden, Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 9,000 units at $42 each. The new manufacturing equipment will cost $156,000 and is expected to have a 10-year life and $12,000 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:
Direct labor $ 7.00
Direct materials 23.40
Fixed factory overhead—depreciation 1.60
Variable factory overhead 3.60
Total $35.60
Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project.

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Accounting

ISBN: 978-0324662962

23rd Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

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