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ow.com mtakeAssignment/takeAssignment Maindo?invokers assignments&takeAssignmentSessionLocatora; assignment take& a ? res Budget On January 1, 20Y2, the controller of Omicron Inc. is planning capital expenditures for the years 20Y2-20YS. The following interviews helped the controller collect the necessary information for the capital expenditures budget: Director of Facilities: A construction contract was signed in late 20Y1 for the construction of a new factory building at a contract cost of $10,000,000. The construction is scheduled to begin in 20Y2 and be completed in 20Y3 Vice President of Manufacturing: Once the new factory building is finished, we plan to purchase $1.5 million in equipment in late 20Y3.I expect that an additional $200,000 wll be needed early in the following year (20Y4) to test and install the equipment before we can begin production. If sales continue to grow, I expect we'll need to invest another S 1,000,000 in equipment in 20s. a er ope at ng Other we have really been gowina lately. I wouldn't be surprised ir we need to expand the size of our new factory building in 20YS by at least 35%. ortunately, we expect infiation to have minimal impact on construction costs over the next four years. In addition, I would expect the cost of the expansion to be proportional to the size of the expansion. Director of Information Systems: We need to upgrade our information systems to wireless network technology. It doesn't make sense to do this untl after the new factory bunlding is completed and producing product. During 20Y4, once the factory is up and running, we should equip the whole facility with wireless technology. I tink it would cost us S800,000 today to install the technology. However, prices have been dropping by 25% per year, so it should be less expensive at a later date. Chief Financial Officer: I am excited about our long-term construction costs on the portion of the new factory building scheduled to be completed in 20Y2. My only short-term concern is managing our cash flow while we expend the $4,000,000 of Capital E Budget For the Four Years Ending December 31, 20Y2-20YS Ceck Phy Work 2 10 50

Explanation / Answer

Capital expenditure budget

6000000

(10000000-4000000)

3500000

(10000000*35%)

450000

(800000*75%*75%)

20Y2 20Y3 20Y4 20Y5 Building

6000000

(10000000-4000000)

4000000

3500000

(10000000*35%)

Equipment 1500000 200000 1000000 Information systems

450000

(800000*75%*75%)

Total 6000000 5500000 650000 4500000

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