The machine that the bakery

written by - Comments off

Doughboy Bakery would like to buy a new machine for putting icing and other toppings on pastries. These are now put on by hand. The machine that the bakery is considering costs $81,000 new. It would last the bakery for nine years but would require a $6,000 overhaul at the end of the fifth year. After nine years, the machine could be sold for $4,000.

The bakery estimates that it will cost $11,000 per year to operate the new machine. The present manual method of putting toppings on the pastries costs $31,000 per year. In addition to reducing operating costs, the new machine will allow the bakery to increase its production of pastries by 2,000 packages per year. The bakery realizes a contribution margin of $0.40 per package. The bakery requires a 5% return on all investments in equipment. (Ignore income taxes.)


1. What are the annual net cash inflows that will be provided by the new machine?

2. Compute the new machine’s net present value. Use the incremental cost approach.

Note: Currently, Regular Priority times are 3-5 days. Log in to upload files with your questions. Tutorials you buy shall be emailed to your PAYPAL email. Talking about quality references: finding and referencing an (n+1)th article for your tutorial requires substantially more time than the (n)th article referenced, therefore you will see the price increasing with the number of references you require in some questions. Wanted to contact us over something related to this question? Email us: support AT

© 2010 Customized Homework help. - Powered by OM