Calculus Ite, a Quebec-based SME, has completed its budget forecast for its first year of year of operation. It expects to sell 10,000 units of its only product, a pocket calculator. Market research indicates that they will be able to sell the calculators at $25 each. The engineer in charge of production estimates the costs of production costs as follows:

raw materials, 8$/unit

direct labour 4$/unit

manufacturing overhead - variable. 2$/unit - fixed 40,000$/year

Half of the fixed manufacturing costs ($20,000) represent book depreciation on equipment and small equipment and small shop floor that the company has already paid in cash. The fixed selling and administrative costs in the first year will be about $50,000.

We ask: (a) analyze the costs and benefits of the project using the accounting method and prepare a projected statement of Calculus' revenues and expenses for the next year;

b) analyze the costs and benefits of the project using the cash flow method and prepare a forecast of Calculus' net cash flow for the next year. Assume that 90% of revenues will be received during this period and 80% of expenses will be paid during the same period

c) reconcile Calculus' annual net cash flow and annual net income for the next next year.