Kurt's Coffees has a new hot drink in mind that is expected to generate sales of 24,000 units over its 2-year life. The initial cost for equipment is $69,500. This equipment will be depreciated straight-line to zero over 2 years and have no salvage value. The fixed costs are $17,800, and the contribution margin is $2.20. The tax rate is 35 percent, and the discount rate is 14 percent. Should this new drink be pursued? Why or why not?

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.