Kelley's Baskets makes handmade baskets for distribution to upscale retail outlets.The firm is currently considering making handmade wreaths as well.Which one of the following is the best example of an incremental operating cash flow related to the wreath project?
A)storing supplies in the same space currently used for materials storage
B)utilizing the basket manager to oversee wreath production
C)hiring additional employees to handle the increased workload should the firm accept the wreath project
D)researching the market to determine if wreath sales might be profitable before deciding to proceed
E)planning on lower interest expense by assuming the proceeds of the wreath sales will be used to reduce the firm's currently outstanding debt

Question

Quizplus · Accepted Answer

Hiring additional employees to handle the increased workload is an incremental operating cash flow as it represents an additional expense that would only be incurred if the wreath project is accepted. Storing supplies in the same space, utilizing the basket manager, researching the market, and assuming lower interest expense are not incremental operating cash flows as they do not represent additional expenses or revenues that are specific to the wreath project.

Kelley's Baskets Makes Handmade Baskets for Distribution to Upscale Retail