Chapter 22 Budgeting 08i.5 , s Capital expenditures budget itu EX 22-22 tes ect On January 1, 20Y2, the controller of Omicron Inc. is planning capital expend apital ures in 00,000 the years 20Y2-20Y5. The following interviews helped the controller coll information for the capital expenditures budget bulding at Dinector of Facinies A construction contract was signed in late 20Y1 for the construction of a a contract cost f so,00,00. The construction is scheduled to begin in 20Y2 and be completed iactory is fnished, we plan to purchase $1.5 million in ice President of Manufactuning: Once the new factory building i following year (20Y4) to t we'll need to invest cel equipment in late 20Y3.I expect that an additional $200,000 will be needed early in the and instailthe equipment before we can begin production If sales continue to grow, l expect we another $1,000,000 in equipment in 20Y5 ChieOperating officer We have really been growing lately. I wouildn't be surprised if we need to expand the new fact rybul ingin 20YS by at least 35%. Fortunately, we expect inflation to have minim al impact costs over the next four years In addition, I would expect the cost of the expansion to be expansion on construction Dinector of information Systems We need to upgrade our information systems to wireless doesn't make sense to do this until after the new factory building is completed and producing product. During 20Y4, ance the factory is up and running, we should equip the whole facility with wireless technology.I think it would cost us $800,000 today to install the technology. However, prices have been dropping by 25% per year, soit should be less expensive at a later date. Chief Financial Officer I am excited about our long-term prospects. My only short-term concern is managing our cash flow while we expend the $4,000,000 of construction costs on the portion of the new factory building sched- uled to be completed in 20Y2 Use this interview information to prepare a capital expenditures budget for Inc. for the years 20Y2-20Y5. Omicron