11L-7

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 $7.46 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. Current (no automation) 83,000 units Per Unit Total $ 99 $ ? Proposed (automation) 130,000 units Per Unit Total $ 99 $ ? 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 $ 16 15 11 42 $ 57 $ 16 2 11 ? $ 60 2 $ 1,210,000 2 2 $ 2,200,000 ? 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Accounting rate of return %