Beacon Company is considering automating its production facility. The initial investment in automation would be $7.99 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 41,000 units per year and a reduction of 20 percent in the labor cost per unit.

Production and sales volume	Current (no automation) 83,000 units		Proposed (automation) 124,000 units
	Per Unit	Total	Per Unit	Total
Sales revenue	$ 98	$ ?	$ 98	$ ?
Variable costs
Direct materials	$ 15		$ 15
Direct labor	20		?
Variable manufacturing overhead	12		12
Total variable manufacturing costs	47		?
Contribution margin	$ 51	?	$ 55	?
Fixed manufacturing costs		1,110,000		2,250,000
Net operating income		?		?

Required:

1-b. Does Beacon Company favor automation?