Beacon Company is considering automating its production facility. million, and the equipment has a useful life of 8 years with a residual value of $1,030,000. The company will use strail line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent the labor cost per unit. Current (no) automation) 82,000 units Proposed (automation) 125,000 units Production and sales volume Per Unit Per Total Unit Sales revenue $ 96 $ ? $ 96 Total $ ? Variable costs Direct materials $ 16 $ 16 Direct labor 15 ? Variable manufacturing overhead 9 9 Total variable manufacturing 40 ? costs Contribution margin $ 56 ? $ 59 Fixed manufacturing costs. $ 1,240,000 Net operating income ? $2,330,000 ? Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)
Beacon Company is considering automating its production facility. million, and the equipment has a useful life of 8 years with a residual value of $1,030,000. The company will use strail line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent the labor cost per unit. Current (no) automation) 82,000 units Proposed (automation) 125,000 units Production and sales volume Per Unit Per Total Unit Sales revenue $ 96 $ ? $ 96 Total $ ? Variable costs Direct materials $ 16 $ 16 Direct labor 15 ? Variable manufacturing overhead 9 9 Total variable manufacturing 40 ? costs Contribution margin $ 56 ? $ 59 Fixed manufacturing costs. $ 1,240,000 Net operating income ? $2,330,000 ? Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![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 $10.31
million, and the equipment has a useful life of 8 years with a residual value of $1,030,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Current (no
automation)
82,000 units
Proposed
(automation)
125,000 units
Production and sales volume
Per
Unit
Per
Total
Unit
Total
Sales revenue
Variable costs
Direct materials
Direct labor
Variable manufacturing
$ 96
$ ?
$ 96
$ ?
$ 16
15
9
$ 16
?
9
overhead
Total variable manufacturing
costs
Contribution margin
40
?
$ 56
?
$ 59
?
Fixed manufacturing costs
$ 1,240,000
$ 2,330,000
Net operating income
?
?
2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)
Accounting rate of return.
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0a75cbc9-802a-4d23-88d8-99621b369cd2%2Fae7e6df7-9b82-425b-9c23-f2de3d9204e9%2Fw5xpjn_processed.png&w=3840&q=75)
Transcribed Image Text: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 $10.31
million, and the equipment has a useful life of 8 years with a residual value of $1,030,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Current (no
automation)
82,000 units
Proposed
(automation)
125,000 units
Production and sales volume
Per
Unit
Per
Total
Unit
Total
Sales revenue
Variable costs
Direct materials
Direct labor
Variable manufacturing
$ 96
$ ?
$ 96
$ ?
$ 16
15
9
$ 16
?
9
overhead
Total variable manufacturing
costs
Contribution margin
40
?
$ 56
?
$ 59
?
Fixed manufacturing costs
$ 1,240,000
$ 2,330,000
Net operating income
?
?
2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)
Accounting rate of return.
%
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