07: Capital Budeting a) A bakery plans to increase its production of rolls by 100 000 per year. Therefore it needs to purchase a new backing oven. The bakery has got two offers and the following data are known: Normalo-Back Back de Luxe 32 000 8% Offer Cost price 18 000 Interest (i) 8% Life span 5 years Material costs per roll 0.10 5 years 0.08 Energy costs per roll 0.02 0.01 Energy costs per year 1 500 1 900 Maintenance per year 1 000 Occupancy costs per 500 2 000 850 year Which backing oven should the bakery purchase? Solution with: Cost Comparison Method (CCM) The bakery expects to produce and sell 100 000 rolls with the Normalo- Back. With the bigger Back de Luxe it could produce and sell 150 000 rolls. What should the bakery decide if the given data above are still applicable? Solution with: Cost Comparison Method (CCM) The bakery can sell 100 000 rolls with the Normalo. The selling price for one roll is 0.25 . With the Back de Luxe it could sell the same amount but the selling price could be increase by 0.05 due to better quality (whole grain). Which baking oven should the bakery purchse? Solution with: Profit Comparison Method (PCM)