Question

Dave's Mirror Company expects to sell $4,000,000 worth of mirrors and to produce $4,250,000 worth of mirrors in the coming year. The company purchases $500,000 of new equipment during the year. Sales for the year turn out to be $3,750,000. UNPLANNED investment by Dave's Mirror Company equals _____ and PLANNED investment equals _______.

Answer 1

Unplanned investment at Dave's Mirror Company is the discrepancy between production and sales ($500,000), while planned investment is the premeditated purchase of equipment ($500,000).

Step-by-step explanation:

The unplanned investment by Dave's Mirror Company equals the difference between the actual production and the actual sales, which is $4,250,000 (amount produced) minus $3,750,000 (actual sales), resulting in an unplanned investment of $500,000.

The planned investment refers to the intended spending on new equipment, which according to the question is $500,000. Therefore, the planned investment equals $500,000. The UNPLANNED investment by Dave's Mirror Company equals $500,000, which is the cost of the new equipment purchased during the year. The PLANNED investment is the expected production worth of mirrors, which in this case is $4,250,000.