The following information is available for year 1 for Pepper Products: Sales revenue (210,000 units) $ 3,045,000 Manufacturing costs Materials $ 158,000 Variable cash costs 142,400 Fixed cash costs 327,600 Depreciation (fixed) 989,000 Marketing and administrative costs Marketing (variable, cash) 432,400 Marketing depreciation 159,600 Administrative (fixed, cash) 509,200 Administrative depreciation 74,800 Total costs $ 2,793,000 Operating profits $ 252,000 All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 6 percent, but prices are expected to rise by 18 percent. Material costs per unit are expected to increase by 11 percent. Other unit variable manufacturing costs are expected to decrease by 10 percent per unit. Fixed cash costs are expected to increase by 5 percent. Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 5 percent. Inventories are kept at zero. Pepper Products operates on a cash basis. Required: Estimate the cash from operations expected in year 2. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 13-52 (Algo) Estimate Cash from Operations (LO 13-5)

The following information is available for year 1 for Pepper Products:


Sales revenue (210,000 units)	$	3,045,000
Manufacturing costs
Materials	$	158,000
Variable cash costs		142,400
Fixed cash costs		327,600
Depreciation (fixed)		989,000
Marketing and administrative costs
Marketing (variable, cash)		432,400
Marketing depreciation		159,600
Administrative (fixed, cash)		509,200
Administrative depreciation		74,800
Total costs	$	2,793,000
Operating profits	$	252,000

All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 6 percent, but prices are expected to rise by 18 percent. Material costs per unit are expected to increase by 11 percent. Other unit variable manufacturing costs are expected to decrease by 10 percent per unit. Fixed cash costs are expected to increase by 5 percent.

Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 5 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.

Required:

Estimate the cash from operations expected in year 2. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

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