Ben's Border Café Is Considering a Project Which Will Produce

question 304

Multiple Choice

Ben's Border Café is considering a project which will produce sales of $16,000 and increase cash expenses by $10,001. If the project is implemented, taxes will increase from $23,000 to $24,500 and depreciation will increase from $4,000 to $5,501. What is the amount of the operating cash flow using the top-down approach?

• A) $4,000
• B) $4,500
• C) $6,000
• D) $7,500
• E) $8,500

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Definitions:

Marginal Revenue Product

The extra income derived from the use of an additional unit of a resource or input in production.

Input

Resources such as labor, materials, and capital that are used in the production process to create goods and services.

Derived Demand

is the demand for a good or service that results from the demand for another good or service. For instance, the demand for steel is derived from the demand for cars.

Factors of Production

The resources of land, labor, capital, and entrepreneurial ability.