Beacon Company is considering automating its production facility. The initial investment in automation would be $9.15 million, and the equipment has a useful life of 7 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 49,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) Proposed (automation) 77,000 units126,000 units Production and sales volumePer UnitTotalPer UnitTotal Sales revenue$97$ ?$97$? Variable costs Direct materials$15 $15 Direct labor 20? Variable manufacturing overhead 10 10 Total variable manufacturing costs 45 ? Contribution margin$52?$56? Fixed manufacturing costs $ 1,130,000 $2,230,000 Net operating income ?? 3. Determine the project's payback period. (Round your answer to 2 decimal places.)

Beacon Company is considering automating its production facility. The initial investment in automation would be $9.15 million, and the equipment has a useful life of 7 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 49,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) Proposed (automation) 77,000 units126,000 units Production and sales volumePer UnitTotalPer UnitTotal Sales revenue$97$ ?$97$? Variable costs Direct materials$15 $15 Direct labor 20? Variable manufacturing overhead 10 10 Total variable manufacturing costs 45 ? Contribution margin$52?$56? Fixed manufacturing costs $ 1,130,000 $2,230,000 Net operating income ?? 3. Determine the project's payback period. (Round your answer to 2 decimal places.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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