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 $9.11 million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight- line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 71,000 units Proposed (automation) 115,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $90 $ ? $90 $ ? Variable costs Direct materials $ 16 $ 16 Direct labor 15 ? Variable manufacturing overhead Total variable manufacturing costs 9 9 40 ? Contribution margin Fixed manufacturing costs. $50 ? $53 ? $ 1,130,000 $ 2,330,000
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 $9.11 million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight- line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 71,000 units Proposed (automation) 115,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $90 $ ? $90 $ ? Variable costs Direct materials $ 16 $ 16 Direct labor 15 ? Variable manufacturing overhead Total variable manufacturing costs 9 9 40 ? Contribution margin Fixed manufacturing costs. $50 ? $53 ? $ 1,130,000 $ 2,330,000
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
Problem 1PS
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8 of 5
oped
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 $9.11
million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Proposed
(automation)
115,000 units
Current (no
automation)
71,000 units
Per
Per
Production and sales volume
Unit
Total
Unit
Total
ook
Sales revenue
$ 90
$ ?
$ 90
$ ?
Variable costs.
Direct materials
$16
$ 16
Direct labor
15
int
Variable manufacturing overhead
9
?
9
Total variable manufacturing costs
40
?
Contribution margin
$50
?
$ 53
?
Fixed manufacturing costs
$ 1,130,000
$ 2,330,000
ences
Net operating income
?
?
3. Determine the project's payback period. (Round your answer to 2 decimal places.)
Payback period
years](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd66add55-7566-4601-9975-e9973d73810a%2Fec057792-db1c-4d42-9ce2-3b63805327c6%2Fwvdama_processed.jpeg&w=3840&q=75)
Transcribed Image Text:+
8 of 5
oped
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 $9.11
million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Proposed
(automation)
115,000 units
Current (no
automation)
71,000 units
Per
Per
Production and sales volume
Unit
Total
Unit
Total
ook
Sales revenue
$ 90
$ ?
$ 90
$ ?
Variable costs.
Direct materials
$16
$ 16
Direct labor
15
int
Variable manufacturing overhead
9
?
9
Total variable manufacturing costs
40
?
Contribution margin
$50
?
$ 53
?
Fixed manufacturing costs
$ 1,130,000
$ 2,330,000
ences
Net operating income
?
?
3. Determine the project's payback period. (Round your answer to 2 decimal places.)
Payback period
years
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