Obsolete Technology is considering purchase of a new computer system to help handle its warehouse inventories. The system costs $50,000, is expected to last 4 years, and should reduce the cost of managing inventories by $22,000 a year. The opportunity cost of capital is 10%. Should Obsolete go ahead?

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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.