You have a factory that produces light bulbs. Your old machine is costing a lot of money lately in repairs and you are considering replacing it. You have two offers: You sell each light bulb for $0.40, the discount rate is 12%, and the corporate tax rate 40%. (a) Which machine would you prefer to buy if your annual production is 1,000,000 light bulbs! (b) At what level of production will you change your answer?

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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.