Free Preparation Discussions
MENU
IMANET Exam CMA Topic 1 Question 77 Discussion
Topic #: 1
Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study, at a cost of $26,000, to determine which product will be more profitable. The results of the study follow.
*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset. The expected value of Gleason's operating profit directly traceable to the sale of frozen desserts is
The estimated incremental after-tax operating cash flows for each year of a capital project consist of two components: the after-tax cash inflows from operations and the depreciation tax shield arising from the purchase of new equipment. The first of these for Pauley can be calculated as follows:
Pauley's total after-tax operating cash inflow for each year of the project's life is thus $36,000 ($30,000 + $6,000). Ii the final year of the project, two additional cash flows must be taken into account, the after-tax proceeds from the disposal of the equipment purchased for the project, and the recovery of working capital devoted to the project. These two additional cash flows can be calculated as follows:
Pauley's total after-tax cash inflow for the final year of the project's life is thus $49,000
($36,000 + $13,000).
Emerson
1 months agoRusty
3 days agoCrista
4 days agoLindsay
6 days agoAnglea
10 days agoSelma
16 days agoDorinda
1 months agoLelia
1 months agoDarell
2 months agoArlene
2 months agoCorrina
25 days agoClay
1 months agoCharlesetta
2 months agoDiane
2 months agoRima
2 months agoDarell
3 months ago