Beacon Company is considering automating its production facility. The initial investment in automation would be $11.45 million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 46,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Current (no automation) 87,000 units Per Unit $92 Total $ ? Proposed (automation) 133,000 units Per Unit $92 Total $?
Beacon Company is considering automating its production facility. The initial investment in automation would be $11.45 million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 46,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Current (no automation) 87,000 units Per Unit $92 Total $ ? Proposed (automation) 133,000 units Per Unit $92 Total $?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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[The following information applies to the questions displayed below.]
Beacon Company is considering automating its production facility. The initial investment in automation would be $11.45
million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 46,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Production and sales volume
Sales revenue
Variable costs
Direct materials
Direct labor
Variable manufacturing overhead
Total variable manufacturing costs
Contribution margin
Fixed manufacturing costs
Net operating income
Accounting rate of return
Current (no
automation)
87,000 units
%
Per
Unit
$92
$19
25
9
53
$39
Total
$?
?
$ 1,100,000
?
Proposed
(automation)
133,000 units
Per
Unit
$92
$19
?
9
?
$44
Total
$?
2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)
?
$2,330,000
?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F38541728-2632-4c41-975b-76745bc903b8%2F2b7cd999-0853-4e23-afa1-77b31470bf92%2Ftyp0hq_processed.jpeg&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 $11.45
million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 46,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Production and sales volume
Sales revenue
Variable costs
Direct materials
Direct labor
Variable manufacturing overhead
Total variable manufacturing costs
Contribution margin
Fixed manufacturing costs
Net operating income
Accounting rate of return
Current (no
automation)
87,000 units
%
Per
Unit
$92
$19
25
9
53
$39
Total
$?
?
$ 1,100,000
?
Proposed
(automation)
133,000 units
Per
Unit
$92
$19
?
9
?
$44
Total
$?
2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)
?
$2,330,000
?
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