Miller Mfg

question 47

Multiple Choice

Miller Mfg. is analyzing a proposed project. The company expects to sell 8,000 units, plus or minus 2 percent. The expected variable cost per unit is $11 and the expected fixed costs are $287,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $68,000. The tax rate is 32 percent. The sales price is estimated at $64 a unit, give or take 3 percent. What is the operating cash flow under the best case scenario?

• A)$144,150
• B)$148,475
• C)$107,146
• D)$168,630
• E)$174,220

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Definitions:

Common Fixed Expense

Costs that do not change with the level of production or sales within a certain range, and are shared across multiple departments or products.

Variable Costing

A costing method that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of goods sold.

Absorption Costing

In this method of accounting, the price of manufacturing a product is calculated by summing the costs of direct materials, direct labor, and all manufacturing overheads, variable and fixed alike.

Fixed Manufacturing Overhead

The total of all costs related to manufacturing that do not change with the level of production, such as salaries of managers and rent of the factory.