Create a budget for the following project: Blazer Company plans on purchasing new equipment to retool its manufacturing process. The project will involve the acquisition of equipment, installation of the new equipment, selling off the old equipment and training the workforce on the new equipment and processes. Blazer expects this project to take two years from beginning to end. Costs and expected income for the project are as shown below.

Your task is to create a two-year cash budget for the project and compute a return on investment (ROI) for the project. You may ignore the time value of money in your calculation. You may make reasonable assumptions to complete this problem so long as you document them.

Facts: a. The equipment to be purchased will cost $455,000. The equipment will be purchased and paid for at the beginning of Year 1.

b. Installation cost will be $55,000.

c. Blazer will purchase a maintenance contract for the equipment. The first year of maintenance is included in the purchase price, but maintenance for the second year will cost $28,500.

d. Initial training cost for the equipment will cost $750 per operator. The company has 25 operators. The company expects to have 20% turnover of its operators in Year 2 and will have to train their replacements.

e. To go along with the new equipment, Blazer will implement a TQM program. This program will cost $14,000 in Year 1 and $32,000 in Year 2. The TQM is expected to save the company $42,500 in manufacturing and material costs in Year 2 when fully implemented, but only half of that in Year 1 during implementation. Because of the new product that the new machinery will produce, the company expects to have increased sales of $675,000 in Year 1 and $1,100,000 in Year 2.

Create a 2 year budget

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