Falk Inc. has a machine with a book value of $50,000 and a five-year remaining life. A new machine is available at a cost of $85,000 and Falk can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five-year life. Should the machine be replaced? no, because the income will decrease by $27,000 per year yes, because income will increase by $23,000 in total

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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.