Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are: Decreased waste $ 75,000 Increased quality 100,000 Decrease in operating costs 62,500 Increase in on-time deliveries 12,500 The system will cost $750,000 and will last ten years. The company's cost of capital is 10%. Required: A. What is the payback period for the flexible manufacturing system? B. What is the NPV for the flexible manufacturing system?

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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.