A company owns a 5-year-old turret lathe that has a book value of $25,000. The present market value for the lathe is $16,000. The expected decline in market value is $2,000/year to a minimum market value of $4,000; maintenance plus operating costs for the lathe equal $4,200/year.A new turret lathe can be purchased for $45,000 and will have an expected life of 8 years. The market value for the turret lathe is expected to equal$45,000(0.70)k at the end of year k. Annual maintenance and operating cost is expected to equal $1,600. Based on a 12% MARR, should the old lathe be replaced now? Use an equivalent uniform annual cost comparison, a planning horizon of 7 years, and the cash flow approach.

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Q: 24

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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.