Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Beacon Company is considering automating its production facility. The initial investment in automation would be $8.56 million, and the equipment has a useful life of
Beacon Company is considering automating its production facility. The initial investment in automation would be $8.56 million, and the equipment has a useful life of 7 years with a residual value of $1,000,000. The company will use straight-line depreciation. Beacon could expect a production increase of 37,000 units per year and a reduction of 20 percent in the labor cost per unit.
Current (no automation) | Proposed (automation) | ||||||||
80,000 units | 117,000 units | ||||||||
Production and sales volume | Per Unit | Total | Per Unit | Total | |||||
Sales revenue | $ | 97 | $ ? | $ | 97 | $ ? | |||
Variable costs | |||||||||
Direct materials | $ | 18 | $ | 18 | |||||
Direct labor | 30 | ? | |||||||
Variable manufacturing overhead | 9 | 9 | |||||||
Total variable manufacturing costs | 57 | ? | |||||||
Contribution margin | $ | 40 | ? | $ | 46 | ? | |||
Fixed manufacturing costs | $ 1,050,000 | $ 2,230,000 | |||||||
Net operating income | ? | ? | |||||||
PA11-2 Part 3 3. Determine the project's payback period. (Round your answer to 2 decimal places.) Payback period years
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started