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Beacon Company is considering automating its production facility. The initial investment in automation would be $8.42 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 32,000 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 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places Current (no automation) 72,000 Proposed (automation) 104,000 units units Per Unit $ 98 $ 17 20 9 45 46 $ 52 Total $ ? 1,200,000 ? Per Unit $ 98 $ 17 ? 9 ? $ 56 Total 2,310,000 ?

Beacon Company is considering automating its production facility. The initial investment in automation would be $8.42 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 32,000 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 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places Current (no automation) 72,000 Proposed (automation) 104,000 units units Per Unit $ 98 $ 17 20 9 45 46 $ 52 Total $ ? 1,200,000 ? Per Unit $ 98 $ 17 ? 9 ? $ 56 Total 2,310,000 ?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Beacon Company is considering automating its production facility. The initial investment in automation would be $8.42 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 32,000 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 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places. Answer is complete but not entirely correct. 24.41 % Accounting rate of return Current (no automation) 72,000 Proposed (automation) 104,000 units units Per Unit $ 98 $ 17 20 9 46 $ 52 Total $? ? 1,200,000 ? Per Unit $ 98 $ 17 ? 2. 00. 9 ? $ 56 Total $? ? 2,310,000 ?
Transcribed Image Text:Beacon Company is considering automating its production facility. The initial investment in automation would be $8.42 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 32,000 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 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places. Answer is complete but not entirely correct. 24.41 % Accounting rate of return Current (no automation) 72,000 Proposed (automation) 104,000 units units Per Unit $ 98 $ 17 20 9 46 $ 52 Total $? ? 1,200,000 ? Per Unit $ 98 $ 17 ? 2. 00. 9 ? $ 56 Total $? ? 2,310,000 ?
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