A machine, costing $30,000 to buy and $2.500 per year to operate, will savemainly labor expenses in packaging over seven years. The anticipated salvage value of the machine at the end of seven years is $4,500.(a) If a 12% return on investment (rate of return) is desired, what is the minimum required annual savings in labor from this machine?(b) If the service life is just five years, instead of seven years, what is the minimum required annual savings in labor for the firm to realize a 12% return on investment?(c) If the annual operating cost increases 10%, say, from $2,500 to $2,750, what will happen to the answer to (a)?

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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.