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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 it 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 pre-unit basis:

Direct Labor $7.00
Direct Materials 23.40
Fixed factor overhead-depreciation 1.60
Variable factor 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 Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9969638

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