XYZ Corporation has annual cash demand of P3,000,000 for a fund set aside for operating expenses. The cost to transfer funds into this account is P500 each time. If cash was not placed into this fund, it would have earned 4% annually. Its current policy is to transfer P125,000 every 15 days. What is the increase /(decrease) in income if the Optimum Cash Balance model was applied to this account?

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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.