6. The production manager of a manufacturing plant figured that by installing four 15- KVAR power condensers the power factor will increase by 20%, resulting in a monthly power savings of P7700.00 Each unit costs P75 000.00 with a 10% salvage value after 10 years. The overall cost of installation is P14 000.00, and the estimated annual cost of maintenance and taxes is P11 800.00. If a 9% sinking fund formula is applied for depreciation, determine the payback period for the condensers. (Ans. 5 years)

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.