Beacon Company is considering automating its production facility. The initial investment in automation would be $7.93 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight- line depreciation. Beacon could expect a production increase of 50,000 units per year and a reduction of 20 percent in the labor cost per unit Current (no Proposed automation) (automation) 79,000 units 129,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $ 99 $? $ 99 $ ? Variable costs Direct materials $ 18 $ 18 Direct labor Variable manufacturing overhead 11 11 Total variable manufacturing costs 59 Contribution margin $40 $46 Fixed manufacturing costs $ 1,980,000 $ 2, 340,000 Net operating income 38 2 ? Required: 1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.) Current (no automation) 79,000 units Per Unit Total $ 99 Proposed (automation) 129,000 units Per Unit Total $ 99 Production and Sales Volume $ 18 Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income 18 30 11 11 59 40 S $ 40 5 1,080.000 $ 2.340.000 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 $7.93 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight- line depreciation. Beacon could expect a production increase of 50,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 79,000 units Per Unit Total $ 99 5 Proposed (automation) 129,000 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 $18 38 11 59 540 $18 ? 11 7 $.46 $ 1,980, cee his 2. Determine the project's accounting rate of return (Round your answer to 2 decimal places.) Accounting rate of return 36 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 $7.93 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight- line depreciation. Beacon could expect a production increase of 50,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 79, 800 units Per Unit Total $ 99 $? Proposed (automation) 129,000 units Per Unit Total $99 $ $ 18 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 $ 18 30 11 59 $40 5.46 $ 1,980,000 $ 330,000 3. Determine the project's payback period (Round your answer to 2 decimal places.) Payback period years 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 $7.93 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight- line depreciation. Beacon could expect a production increase of 50,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 79,000 units Per Unit Total $.99 $? Proposed (automation) 129,000 units Per Unit $ 99 Total $? $ 18 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 $ 18 ? 11 11 59 $40 $ 46 $3,000,000 $ 2,340,000 4. Using a discount rate of 15 percent, calculate the net present value (NPV) of the proposed investment (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.) Net present value 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 $7.93 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight- line depreciation. Beacon could expect a production increase of 50,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 79,000 units Per Unit Total $ 99 $? Proposed (automation) 129, eee 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 $ 18 3e 11 59 $ 40 $ 18 ? 11 $ 46 $ 1,880, Bee $ 2,340.000 5. Recalculate the NPV using a 10 percent discount rate. Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.) Net present value
