Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $9.11 million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight- line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 71,000 units Proposed (automation) 115,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $90 $ ? $90 $ ? Variable costs Direct materials $16 $16 Direct labor 15 ? Variable manufacturing overhead 9 9 Total variable manufacturing costs 40 ? Contribution margin $50 ? $53 ? Fixed manufacturing costs $ 1,130,000 $2,330,000 Net operating income ? ? 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Accounting rate of return 13.17 %

Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $9.11 million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight- line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 71,000 units Proposed (automation) 115,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $90 $ ? $90 $ ? Variable costs Direct materials $16 $16 Direct labor 15 ? Variable manufacturing overhead 9 9 Total variable manufacturing costs 40 ? Contribution margin $50 ? $53 ? Fixed manufacturing costs $ 1,130,000 $2,330,000 Net operating income ? ? 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Accounting rate of return 13.17 %

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 51P: Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new...

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