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Answer:
$467,023
Explanation:
The operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
where,
EBIT = (Selling price per unit - variable cost per unit) × number of units - fixed cost
= ($339 - $168) × 5,700 units - $425,000
= $549,700
Income tax expense = (Selling price per unit - variable cost per unit) × number of units - fixed cost × tax rate
= ($339 - $168) × 5,700 units - $425,000 × 0.21
= $115,437
And, the depreciation expense would be
= Depreciation expense × tax rate
= $156,000 × 0.21
= $32,760
Now put these values to the above formula
So, the value would equal to
= $549,700 + $32,760 - $115,437
= $467,023
According to above equation, the Operation Cash Flow given this analysis is equal to $467,023.
What is the term Operating Cash Flow about?
Operating Cash Flow determination include only cash items are considered and all non-cash items are removed from profit of the year to reach an amount of Operating Cash Flow.
Solution:-
The operating cash flow is shown below:
EBIT + Depreciation - Income tax expense
EBIT = (Selling price per unit - variable cost per unit) × number of units - fixed cost
EBIT= ($339 - $168) × 5,700 units - $425,000
EBIT= $549,700
Therefore,
Income tax expense = (Selling price per unit - variable cost per unit) × number of units - fixed cost × tax rate
Income tax expense= ($339 - $168) × 5,700 units - $425,000 × 0.21
Income tax expense= $115,437
And, the depreciation expense would be
= Depreciation expense × tax rate
= $156,000 × 0.21
= $32,760
Now, put these values to the above formula:-
Operating Cash Flow= $549,700 + $32,760 - $115,437
Operating Cash Flow= $467,023
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