A firm bought a used machine 2 years ago for $1500. When new, the machine cost $8000. Today it could be sold for $500. Which of the following statements is true? (a) The fixed cost for operating the machine can be ignored in any analysis. (b) The $8000 purchase price is not included in the analysis. (c) The $1500 paid 2 years ago is included in the analysis. (d) The variable cost of ownership is the difference between what was paid and what the machine is now worth ($1500 – $500 = $1000).

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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.