Beacon Company is considering automating its production facility. The initial investment in automation would be $8.49 million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight- line depreciation. Beacon could expect a production increase of 34,000 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 PA11-2 Part 1 Required: 1-b. Does Beacon Company favor automation? Req 1A Req 18 Complete the following table showing the totals. Note: Enter your answers in whole dollars, not in millions. Complete this question by entering your answers in the tabs below. 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 Per Unit $ $ Current (no automation) 86000 units $ 93 19 20 8 47 46 Current (no automation) 86,000 Proposed (automation) 120,000 units units Total 1,100,000 Per Unit $93 $ 19 20 8 47 $ 46 $ Per Unit $ $ Proposed (automation) 120000 units Total 93 19 8 Total 57 50 1,100,000 ? 2,230,000 Per Unit $.93 $19 ? 8 7 $ 50 Total $7 2,230,000 ?
Beacon Company is considering automating its production facility. The initial investment in automation would be $8.49 million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight- line depreciation. Beacon could expect a production increase of 34,000 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 PA11-2 Part 1 Required: 1-b. Does Beacon Company favor automation? Req 1A Req 18 Complete the following table showing the totals. Note: Enter your answers in whole dollars, not in millions. Complete this question by entering your answers in the tabs below. 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 Per Unit $ $ Current (no automation) 86000 units $ 93 19 20 8 47 46 Current (no automation) 86,000 Proposed (automation) 120,000 units units Total 1,100,000 Per Unit $93 $ 19 20 8 47 $ 46 $ Per Unit $ $ Proposed (automation) 120000 units Total 93 19 8 Total 57 50 1,100,000 ? 2,230,000 Per Unit $.93 $19 ? 8 7 $ 50 Total $7 2,230,000 ?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Beacon Company is considering automating its production facility. The initial investment in automation would be $8.49
million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 34,000 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
PA11-2 Part 1
Required:
1-b. Does Beacon Company favor automation?
Req 18
Complete the following table showing the totals.
Note: Enter your answers in whole dollars, not in millions.
Req 1A
Production and Sales Volume
Complete this question by entering your answers in the tabs below.
Sales revenue
Variable costs
Direct materials
Direct labor
Variable manufacturing overhead
Total variable manufacturing costs
Contribution margin
Fixed manufacturing costs
Net operating income
Per Unit
$
$
Current (no automation)
86000 units
$
93
$9.85
20
47
46
< Red 1A
Total
Current (no automation) 86,000 Proposed (automation) 120,000
units
units
1,100,000
Per Unit
$.93
$19
20
8
47
$ 46
$
Per Unit
$
$
Proposed (automation)
120000 units
93
19
8
50
Req 18 >
Total
$?
1,100,000
?
Total
2,230,000
Per Unit
$.93
$ 19
?
8
?
$ 50
Total
$?
2,230,000
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