Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52 million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 47,000 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 equired: a. Complete the following table showing the totals. Current (no automation) 81,000 Proposed (automation) 128,000 units units Per Unit $94 $ 17 30 9 56 $38 Total $? ? 1,240,000 ? Per Unit $94 $ 17 ? 9 ? $44 Total 2,200,000 ?

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Chapter1: Financial Statements And Business Decisions
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Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52
million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 47,000 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
Required:
1-a. Complete the following table showing the totals.
Current (no automation) 81,000 Proposed (automation) 128,000
units
units
Per Unit
$94
$ 17
30
9
56
$38
Total
$ ?
?
1,240,000
?
Per Unit
$94
$ 17
?
9
?
$44
Total
$ ?
?
2,200,000
?
Transcribed Image Text:Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52 million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 47,000 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 Required: 1-a. Complete the following table showing the totals. Current (no automation) 81,000 Proposed (automation) 128,000 units units Per Unit $94 $ 17 30 9 56 $38 Total $ ? ? 1,240,000 ? Per Unit $94 $ 17 ? 9 ? $44 Total $ ? ? 2,200,000 ?
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